On Thursday. Magellan shares gained 3.2 per cent to trade at $19.18. That means the shares are 3.8 per cent higher so far this week, despite tumbling more than 10 per cent on Monday.
However, over one year, Magellan shares are 62 per cent lower as traders factor in outflows as a result of the underperformance of its global funds.
Zenith’s action follows a move earlier in the week by Lonsec to advise clients to hold off on new investments as it considers the changes to Magellan’s investment team,
“Zenith believes Mackay is an impressive investor who is supported by a well-resourced and experienced investment team, as such we retain comfort that Mackay is appropriately suited to take on the aforementioned roles,” Zenith said in an update to clients.
Zenith also maintains confidence in Mr Thomas, Mr Streimann and Mr Wheldon as portfolio managers, having met with and reviewed each of them on several occasions.
“However, given our high regard for Mr Douglass, we consider his leave of absence to be a material loss for Magellan’s global equities suite and overall business.”
Mr Mackay will oversee the management of the retail and institutional global funds, and will co-manage the Magellan global funds with Mr Streimann and Nikki Thomas, who returned to the firm after departing in a restructure back in 2017.
Nikki Thomas returned to the firm after departing in in 2017. Louie Douvis
Staff loans being probed
Zenith is among Magellan’s largest backers and in addition to the coveted highly recommended rating has selected the Magellan Fund in its elite model portfolio. The model portfolio is used by financial planners to allocate funds on behalf of clients.
Zenith also made reference to Magellan’s staff retention mechanisms in which employees, including the investment team, can sign up for equity financed by interest free loans provided by Magellan to staff including analysts.
The analyst compensation model was raised in a briefing on Tuesday with private wealth advisers, with the company stating the issue would be addressed.
“As it relates to Magellan’s staff retention mechanisms which have been reported in the press of late, including staff equity plans and loan initiatives, Zenith understands that these are currently under review. However, no immediate changes have been communicated to date,” the Zenith update said.
It has followed a turbulent time for Magellan as its global funds have lagged the global sharemarket benchmark.
The departure of chief executive officer Brett Cairns and an announcement that Mr Douglass had separated with his wife weighed on the fund. In December, Magellan’s largest client St James’s Place redeemed $22 billion.
On Monday, Morningstar placed seven Magellan global funds as “under review” following the announcement relating to Mr Douglass’ leave, given his “integral involvement”.
