06-July-2023: Funds-Under-Management-and-Performance-Fee-Update--June-2023.PDF

Not what we wanted to see, in terms of further FUM outflows. However, the distribution amount and the performance fees earned are not too bad. Compare that to one year ago (the same notice for the FY ended June 30, 2022):

08-July-2022: Funds-Under-Management---June-2022.PDF

Comparisons:

June 30 FY23, vs June 30 FY22, movement (%):

Global Equities: $19.1 billion vs. $33.3 billion -42.6%

Infrastructure Equities: $16.1 billion vs. $20.1 billion -19.9%

Australian Equities: $ 4.5 billion vs. $ 7.9 billion -43.0%

Total FUM: $39.7 billion vs. $61.3 billion -35.2%

Note: Total FUM change (%) includes both flows (inflows and outflows) and investment performance.

July Distribution: $ 0.3 billion vs. $ 0.4 billion -25%

Performance Fees: $11 million vs. $11 million Same

Hopefully the columns above will survive in both the PC and App (mobile device) versions of Strawman.com.

My takeaway from this is that we should expect lower dividends than last year, even though the performance fees earned are the same, because the base management fees would be lower, because they are based on less FUM (funds under management). However, I'm happy to continue to hold MFG shares because I think they can still turn this around.

I don't think they're going back to $60/share any time soon, but I think they can get back closer to $20 than $10, given time.

The market does not like today's announcement, clearly, and that is to be expected, because after their outflows had slowed and their insto flows were flat in May, they saw $1.7 billion of insitutional outflows in June. Not what we want to see. It means the IT (investment thesis) could take longer than expected. Assuming it does play out.

They did have a little run-up recently, and the Sandon Capital (SNC) presentation would have been part of the reason behind that rally, but today's FUM, Fees & Distributions announcement provides a bit of a reality check, in terms of where they are now.

Note: The July Distributions ($0.3 billion this month) are to the unitholders of the funds that MFG manage, rather than MFG dividends. The MFG dividends will be declared later and will be based on fees earned (base fees plus performance fees) and their available cash (which is a significant amount of cash currently).

Disclosure: I hold MFG and SNC shares in real life, but not here on SM.

06-June-2023: Funds-Under-Management---May-2023.PDF

Better! No insto outflows and small amount of retail outflows - in the context of their overall FUM of $41.4 billion. Plus a little loss on share price movements during May. Not too bad. The brakes are on. They've almost come to a stop. Now for the turnaround.

Disclaimer: I hold MFG in one RL portfolio and I also hold MGF (MFG's flagship global equities fund) in the small portfolio I manage for our two children. I have MFG (the manager) under review currently. I want to see these FUM outflows stop and some inflows begin, but I understand that could take some time. It's a confidence thing, and there are plenty of reasons why people have lost confidence in Magellan.

I'm probably being too patient.

05-April-2023: Looking at today's FUM update from MFG:

What's interesting to me is that the FUM outflows have been from their Australian Equities, i.e. Airlie Funds Management, which I reckon might have something to do with the founder of Airlie announcing (in early March) his intention to retire - John-Sevior-announces-intention-to-retire.PDF

Airlie's FUM has dropped -33% from 9 billion to 6 billion!

06-Feb-2023: Funds-Under-Management---January-2023.PDF

The FUM outflows appear to be slowing - due to a good January from an investment return perspective, MFG have reported increased FUM this time (up +$0.9 billion to $46.2 billion) despite net outflows of $0.5 billion, which included net retail outflows of $0.3 billion and net institutional outflows of $0.2 billion.

Better!

19-July-2022: Magellan-Financial-Group-Limited---Board-Change.PDF

plus: Magellan-InReview-2022.PDF

Magellan Financial Group Limited is pleased to announce the appointment of Mr David George to the Board of the Company as well as the Board of Magellan Asset Management Limited (the main operating subsidiary) effective today with the commencement of his employment.

Mr. George’s commencement date with Magellan and his appointment to the Board were announced previously to ASX on 11 May 2022 and 9 June 2022.

Chairman Hamish McLennan said “We welcome David to the Board of Magellan in his role as CEO and Managing Director of the Company. His investment management experience brings deep expertise and a fresh perspective to the Board”.

Mr David George commented “I am excited to join Magellan as CEO. This is an important period for Magellan to demonstrate value to clients and shareholders, and I am confident we will deliver the strategy and strong investment performance to support this. I look forward to working with the Magellan Board as we restore growth to the business”.

Mr George’s biography is outlined in the attached appendix. A summary of the Board and its associated committee members is also attached.

---

About Magellan

Magellan Financial Group is a specialist funds management business established in 2006 and based in Sydney, Australia. Magellan’s core operating subsidiary, Magellan Asset Management Limited, manages approximately $61 billion of funds under management at 30 June 2022 across its global equities, global listed infrastructure strategies and Australian equities strategies for retail, high net worth and institutional investors and employs approximately 140 staff globally. Magellan is listed on the Australian Securities Exchange (ASX Code: MFG). Further information can be obtained from www.magellangroup.com.au.

Appendix

Mr David George

CEO and Managing Director

David joined Magellan in July 2022. As CEO and Managing Director he has overall responsibility for Magellan’s operations, including its investment functions.

Prior to Magellan, David’s career spans over 20 years in institutional investment management across analytical roles, investment management and organisational leadership in Australia and Canada.

Most recently, David spent 14 years at the Future Fund (Australia’s Sovereign Wealth Fund). This included roles evaluating and investing alongside external investment managers, leadership of a sector team, and finally as Deputy Chief Investment Officer, Public Markets with responsibility for equities, credit, derivative overlays, public market alternatives, cash and treasury. David also served as a member of the firm-wide Senior Management Team and on all relevant internal investment portfolio management and risk committees.

Prior to the Future Fund, David held senior roles at Mercer Investment Consulting, the Royal Bank of Canada and Integra Capital Management.

David is a CFA and CAIA Charterholder and holds a Bachelor of Arts (Economics) degree from Western University in Canada. David also sits on the Board of the CAIA Association and is a trustee of the Standards Board of Alternative Investments.

The Board of Directors of Magellan now comprise of:

• Mr Hamish McLennan, Chairman
• Mr Robert Fraser, Deputy Chairman
• Mr David George, CEO and Managing Director
• Mr John Eales, Non-Executive Director
• Ms Colette Garnsey, Non-Executive Director
• Ms Karen Phin, Non-Executive Director

Non-executive Directors are also members of the Audit and Risk Committee, chaired by Mr Robert Fraser and the Remuneration and Nominations Committee, chaired by Mr John Eales.

---

Magellan InReview 2022

Pursuant to Listing Rule 3.17.1 the following has been shared with shareholders and can be found on Magellan’s website at https://2022.magellaninreview.com.au/:

• ‘The world confronts an unusual number of difficulties’— the annual investor letter from Global Portfolio Managers Nikki Thomas and Arvid Streimann;
• a video interview with Nikki Thomas and Arvid Streimann discussing the latest global portfolio positioning and the current macro environment;
• a video interview between Arvid Streimann and the Former Secretary of Defense and CIA director Leon Panetta, including the key talking points;
• a collection of video interviews and written investment perspectives from across Magellan’s investment team, including but not limited to Infrastructure and ESG; and
• Annual Fund Reviews and Quarterly Fund Factsheets for Magellan’s range of global equities and global listed infrastructure portfolios.

---

MFG up +3% today, ahead of the market. Coming off a VERY low base...

Further Reading: https://www.businessnewsaustralia.com/articles/future-fund-deputy-cio-david-george-named-new-magellan-managing-director.html

Disclosure: I hold MFG shares.

27-June-2022: Investment Insights: Navigating global markets with Magellan

Click on that link (above) for: Future Generation CEO Caroline Gurney talks to Nikki Thomas, Portfolio Manager of Global Equities at Magellan Financial Group to discuss Magellan's portfolio adjustment, Nikki's market outlook, top stock picks and the future of Magellan.

Dated Sunday 27th June 2022, so very recent (today in Monday 28th June). Nikki sounds competent and confident and the interview is worth watching if you're currently invested in MFG or one of their funds (like MGF), or are considering an investment in either the manager (MFG) or one of their managed funds.

Disclosure I hold FGX and MFG shares, plus MGF units, plus have held FGG at various times and likely will do again. MFG currently manage around 10% of FGG's funds on a fee-free (pro bono) basis as all the fund managers do for both FGX and FGG.

For more info: Future Generation Global — Future Generation (futuregeninvest.com.au)

19-June-2022: I sold out of MFG in December at $23.50, then bought some back at $20.99 in February when Magellan co-founder Chris Mackay was brought back, then more at $14.53 in March, then more at $13.02 on June 6th (2 weeks ago). They closed on Friday at $12.48.

Here on SM I sold later, for less, at $16.43 then bought back in at $13.12 (+ some tiny top ups below $13).

While they look very cheap to me at current levels, I believe I already have significant exposure to the management company (MFG), so I intend to watch and wait now, rather than to keep adding to those positions. The thing is - they're not Robinson Crusoe there because there are a lot of quality companies that look cheap at this point. 

And there have been some significant changes since Hamish Douglass stepped back and Chris Mackay stepped back in. I don't have a strong opinion on what Chris should or should not do with MFG now, but I understand that he has been keen to return to basics somewhat, or to focus more on what they focused on back when he started the company with Hamish, and less on the newer stuff, such as Australian direct investments (GyG - Guzman y Gomez), other private equity ventures (Barrenjoey), and investing in China, particularly Chinese Tech.  Alibaba was 3.2% of the MGF (Magellan Global Fund) portfolio at 31 December, but word is Chris and the other PMs have sold out of BABA now. Hamish had previously sold out of Ten Cent at a big loss.

Also, at the end of December (as listed above), Netflix was their second largest position and Meta (Facebook) was 9^th largest position. Neither are top 10 positions now. Nor is Starbucks or Pepsico.  The following is from their May 2022 report:

Dumping or reducing exposure to Netflix was a sensible move because NFLX is being seriously challenged by other streaming services from every direction - and they no longer have a strong moat. Netflix isn't just being sold down as part of the big tech sell-off, they really should not be part of the FAANG group anymore because they have become structurally challenged. FAANG should really now be MAAAM - Meta (FB), Alphabet (Google), Amazon, Apple & Microsoft.

Source: Commsec.

That's a BIG decline - from almost $700/share to $175/share in 7 months. Like I said, that's more than just a "tech sell-off".

Another thing to note is that up until February, MGF was splitting out China as part of their geographical exposure disclosure:

However from their March 2022 report, China exposure has been included in "Emerging Markets":

So, they don't see exposure to China tech stocks (or China in general) as a positive so much now. Or at the very least they have decided to no longer highlight their China exposure. 

While I understand the benefits of diversification, I also feel that Chris may be of the opinion that Hamish lost his way somewhat and that getting back to what they did best at the start, and what they were doing when they had their greatest success - even what Hamish was doing after Chris left when Hamish had his greatest period of outperformance - is the best way forward. 

That is entirely understandable, and probably what people should have expected from Chris Mackay when he was brought back in.  I don't think he was ever going to be a silent caretaker type. He is going to manage, and make sensible calls. He has been successfully managing MFF for years, and he knows what he's doing.

Hamish is returning as a consultant, but not as a portfolio manager, so it will be interesting to see how the Magellan funds (like MGF) continue to evolve, and when the FUM outflows (for MFG) stabilise and actually reverse (become inflows once again). Unlikely to happen in the current "correction" environment, but at some point it will happen.

Magellan is invested in some very high quality global companies, and I have retained my exposure to MGF (the fund) through the past year of troubles with the manager (MFG), and have sold out and then bought back in (at lower levels) to the manager (MFG). Now I'm happy to wait and watch. It may well get worse before it gets better, but it will get better. Chris has made some sensible moves and Hamish's insights and brilliance (despite some miss-steps in recent years) has not been entirely lost to Magellan.

Hamish and Chris a couple of years after they started Magellan Financial Group. [Source: The Australian Newspaper]

08-Dec-2021: While I was at work this aftermoon, another announcement was made by MFG, this time confirming that Hamish Douglass and his wife Alexandra seperated some months ago, something that was widely known in financial circles, hence some referring to Hamish's "personal issues", but that neither had any intention of selling any of their MFG shares.

The announcement was worded like this:

Statement from Alexandra and Hamish Douglass

Alexandra and Hamish Douglass wish to confirm that they separated some months ago. As our family and close friends appreciate, we both remain extremely close and united. We continue to spend considerable time together, and as a family.

There has been unfounded speculation in the media regarding our shareholding in Magellan Financial Group. We can confirm that we have no intention to sell any of our shares in Magellan Financial Group.

Hamish said “I remain totally committed to the business and its future. I would like to thank our clients and my outstanding colleagues for their ongoing support. Alex and I would like to thank our family and friends for their incredible support and we would ask people to respect our family’s privacy moving forward.”

Alexandra and Hamish Douglass

8 December 2021

--- ends ---

Didn't do the MFG share price any harm, as it continued to recover during the afternoon from that $28.03 low this morning, closing at $30.35, up +4.3% on Tuesday's close of $29.10.

Further Reading: Inside billionaires' shock split after chairman seen 'on James Packer's yacht' left wife of 30 years | Daily Mail Online

[I don't think being seen on James Packer's yacht a few months ago is entirely relevant, but hey, it's the Daily Mail, so that's what you get. They're certainly not interested in respecting any family's privacy.]

Here's something with a little bit more journalistic integrity:

Hamish Douglass: "McDonald's has made such a contribution in giving people their first jobs, and training people in the skills of process and discipline."  Photo: Louise Kennerley

Why billionaire Hamish Douglass loves Maccas (afr.com) [Jul 20, 2019]

Disclosure: I hold MFG shares and MGF units, and was buying more MFG shares this morning at $29.38.

08-Dec-2021: MFG fell -4% on Monday, then another -6.4% yesterday on the news that their CEO Brett Cairns had quit, with immediate effect, "for personal reasons". That meant a $29.10 close yesterday, a level we hadn't seen with Magellan since January 2019. This morning, they traded as low as $28.03, and then started rallying. I picked up some more at $29.38 on the way up, and they've been as high as $30.08 and are now hovering in the high $29s.

There is an interesting article in The Age this morning about this not being a good look at all for MFG, however I imagine bargain hunters have moved in now regardless.

Hamish Douglass has been making all of the investment decisions at MFG, while Brett was doing work previously done by Hamish that Hamish did not particularly enjoy, which involved setting up new products and liasing with various other stakeholders and regulators. The driving force behind Magellan here in Australia is, and has always been Hamish Douglass however, and the early outperformance is all down to him, as is the more recent underperformance. Hamish makes all of the big calls. Most people may not even know what Brett Cairns looks like.

That's him on the left, with Hamish on the right.

I'd like to think that $28.03 level very briefly tagged this morning is the low point for MFG, but we shall see. It would help if they start releasing better performance stats. Their FUM is still holding up, but they need to making more money with that $116.4 billion.

Disclosure: I hold MFG in 2 RL portfolios as well as here on SM, and I've been topping up during the past week. I also hold units in their global fund (ASX: MGF).

05-Feb-2021:  Funds Under Management - January 2021

In January, Magellan experienced net inflows of A$223 million, which included net retail inflows of A$85 million and net institutional inflows of $137 million.  Total FUM is now A$100.4 billion, of which around 27% is Retail and 73% is Institutional FUM (funds under management). 

Retail is generally higher margin than institutional, so it would be positive to see the retail percentage move higher over time.  Around two years ago Hamish Douglass stated that they intended to increase the percentage of their FUM that came from higher margin retail investors.  However, 12 Months ago, the split was the same (27/73) so there has been no improvement over the past year.  Magellan had tried to raise their own profile by becoming the main corporate sponsors of the Australian Men's Cricket Team, but they then cancelled that sponsorship deal in the wake of the "sandpaper-gate" ball-tampering scandal.  Also, 12 months ago (31-Jan-2020), Magellan's total FUM was A$104.3 billion, vs. A$100.4 billion now, so they haven't gained ground there either in the past year.  Most of Magellan's FUM is invested in US companies and one A$ was worth 67 US cents on 31-Jan-2020, and was worth 76.7 US cents on 29-Jan-2021, so their FUM was worth around US$155.7 billion a year ago (on 31-Jan-2020), and was worth US$130.9 billion on 31-Jan-2021, so that looks even worse in US$ terms.

I'm no longer invested in MFG, the manager of the Magellan funds, but I do hold units (for my kids) in 2 of the funds that they manage, being MHH (the Magellan High Conviction LIT: Listed Investment Trust) and MGF (the Magellan Global Fund, formerly MGG) which is a "registered managed investment scheme".  Both are listed funds, so their units can be traded on the ASX just like any other shares can be.

For a good overview of how they see things and what they are currently invested in - see here:  Magellan Minutes - Magellan Financial Group (magellangroup.com.au)

17-Oct-2020:  Magellan Live Webinar - What Really Matters?

Hamish Douglass gives his thoughts on the US election, explains a critical assumption driving share markets higher and tells why Chinese tech giants will survive any decoupling with the US. (Viewing time: 60 mins)

Marcus Padley provided a link to it in his "MarcusToday" Saturday email this morning and said:  "This webinar was probably one of the most watched this week - it’s a great bit of marketing in disguise of course from Magellan but hopefully we don’t compete with Hamish.  Hamish Douglass is the chairman, CIO and Lead Portfolio Manager at Magellan.  The webinar includes “his thoughts on the US election, explains a critical assumption driving share markets higher and tells why Chinese tech giants will survive any decoupling with the US”.  Good weekend watching although it does take an hour."

I don't currently hold MFG, however I do hold MGG & MHH (in the portfolio I manage for my 2 kids) which are two LITs that are both managed by MFG.  Hamish Douglass is a superstar investment manager and always worth listening to.

07-Oct-2020:  Funds Under Management - September 2020

In September, Magellan experienced net inflows of $1,198 million ($1.2 billion), which included net retail inflows of $239 million and net institutional inflows of $959 million.

September 30 Total FUM was $102,088m ($102 billion).  When Hamish Douglass and Chris Mackay started Magellan and Hamish said he was targeting FUM of $50 billion, very few people thought that target was anything other than delusional - a joke - but here we are after a few years and he has DOUBLE that amount in Funds Under Management and Magellan is the Premier Australian-based global investment firm, and is in the ASX100 index.

I like MFG, however I do not currently hold them simply due to the share price being a little high for my liking.  I like them better under $50, and better still under $40.  I've made money on MFG in the past, but I've jumped off the ride too early, such as when their sponsorship deal with Cricket Australia fell through (Hamish cancelled the deal) on the back of the ball-tampering scandal (sandpapergate).  They more than doubled from there, and I had already sold out.  What I've learned about MFG is that you should NEVER underestimate Hamish Douglass.  He's VERY smart, and he has a lot of very smart people globally on retainer providing him with up-to-date information on pretty much everything.  He believes that good information is very valuable and he's happy to pay for it.  I would consider him to be the most informed global fund managers we have.  He also treats his unitholders/investors very well.  He has set new standards for Australian fund managers where the management company absorbs the costs of IPOs, DRP-discounts, bonus units, etc, not the unitholders (investors).  I currently have his MGG and MHH LITs (listed investment trusts) in the portfolio I run for my two children - along with FGX.

MFG's September inflows - during a month when the Australian market lost ground - suggests to me that money is coming back into the market off the sidelines now, that the majority are seeing more upside than downside from here - globally.  I'm not sure I agree with that short term, but it's still interesting to note.

14-7-2020:  https://2020.magellaninreview.com.au/

And for their individual fund reviews:  https://2020.magellaninreview.com.au/#fundReviews

MFG is of course the manager, not a fund, and I don't currently hold MFG shares (wish I did!!), but I do hold shares in some of their listed funds, such as MGG & MHH (which MFG manage).

They sent me an email this afternoon that started off with:

"The past six months have been truly extraordinary, unlike any other global crisis that people have seen in their careers. More than 13 million people have now been infected as covid-19 has spread around the world. The human cost of the virus is sobering and so too is the economic damage. Authorities globally have responded with unprecedented stimulus that arrested markets from their March lows. As the end of the financial year passes, we’ve taken stock of the past 6 to 12 months and share with you our most up-to-date investment thinking in ‘Magellan's InReview 2020’, our annual investor communication published in July each year." 

"Magellan's InReview 2020 has a collection of deeply thought-provoking investment perspectives from across the Magellan investment teams. It includes a keynote article by Hamish Douglass - 'Knowing what you don’t know’, a recent video in which Janet Yellen, the former Chair of the US Federal Reserve, and adviser to Magellan, talks to Hamish Douglass about the outlook for the global economy, as well as articles from Airlie Funds Management’s Matt Williams and Magellan’s Global Listed Infrastructure Head, Gerald Stack."

"Annual Fund Reports and Quarterly Fund Factsheets for our range of global equities, global listed infrastructure and Australian equities portfolios, can also be found in Magellan’s InReview 2020 site."

The second link at the top of this straw (2nd from the top) can be used to access their reviews of the various funds that they manage.

Magellan (MFG) are the most respected global fund managers that Australia has ever produced I believe, and certainly one of the most successful, having easily surpassed Kerr Neilson and his team at Platinum Asset Management.  Platinum specialise in Asia, particularly China.  Magellan do own Chinese stocks, like Tencent and Alibaba, but most of Magellan's biggest winners are listed in the USA.  MFG itself (the manager) has been a brilliant stock to own, but I always end up selling out way too early...

04-June-2020:  Funds Under Management - May 2020

04-June-2020:  Launch of Airlie Australian Share Fund (Active ETF)

MAGELLAN FINANCIAL GROUP LIMITED

Launch of Airlie Australian Share Fund using next generation of Active ETFs

• Magellan launches the next generation of Active ETFs, bringing together the features of an unlisted fund and Active ETF into a single unit in a single fund
• Provides investors with greater choice and flexibility in how they invest and will deliver efficiencies to fund managers

Magellan Financial Group Limited (“Magellan”, ASX: MFG) is pleased to announce that the Airlie Australian Share Fund (Ticker: AASF) will commence trading on the ASX today. 
 
Brett Cairns, Magellan’s CEO, said today: “The launch of Airlie Australian Share Fund on the ASX represents an important evolution of Active ETFs in Australia.  This simplification eliminates the need to have two separate funds, one for investors who prefer using unlisted funds and another for those who prefer funds quoted on a stock exchange. Instead, investors, advisers and brokers will now be able to invest in a single, open-ended fund using the access point they prefer.” 
 
“Magellan has always focussed on simplifying the investment process for our investors and reducing unnecessary frictions and costs. We intend to use these next generation open-ended funds to deliver effective investor solutions in the future.” 
 
Matt Williams, portfolio manager for the Airlie Australian Share Fund, said: “The Airlie Australian Share Fund is a product of the partnership between Magellan and Airlie Funds Management. Airlie’s approach to investing has been developed over 25 years and employs a conservative and robust process that weighs the financial strength, business quality, quality of management and valuation of each company. We are excited to make Airlie’s investing expertise accessible to investors through the ASX.” 
 
The Airlie Australian Share Fund (Ticker: AASF) is the fourth Active ETF launched by Magellan and has outperformed the Australian market by 6.6% net of fees over the 12 months to 31 May 2020. 
 
With around A$2.5 billion in funds under management and over 35,000 unitholders, Magellan’s Active ETFs have been widely adopted by investors who benefit from:

• The ability to buy and sell units on the stock market and settle via CHESS;
• Access to real time and transparent market pricing;
• Active portfolio management;
• Efficient pricing due to the open-ended nature of the Fund; and
• A high level of liquidity with the Fund providing liquidity to investors.  

Note:

(1) The Airlie Australian Share Fund has returned 2.7% p.a. since inception on 1 June 2018, outperforming the Australian market by 0.9% p.a. over that period.  Past performance is not necessarily indicative of future performance. 

--- click on link above for more ---

Further Reading:  AFR (04-June-2020): Magellan hails new era for active ETFs with Airlie launch

https://www.raskmedia.com.au/2020/06/04/magellan-asxmfg-announces-new-etf-and-may-fum/

08-May-2020:  As far as brokers and analysts go, everybody has huge respect for Hamish and what he has achieved with Magellan, as well as his vision, his strategy, and the way he communicates and promotes the company.  Their issues are always around valuations and what the best ways to play the theme are, i.e. via the manager (MFG), through the listed funds (MGG, MHH), or via his unlisted open-ended funds.  All have slightly different fee structures and distribution yield targets.  

In his midday (lunch time) email today, Marcus Padley said this:

The importance of Technology investments – Overnight Paypal hits a record high up 14% on results, the NASDAQ is now up for the year, Viacom was up 10% on results overnight, Uber was up 11% on results overnight, Atlassian hits a record high. And you’re still wondering whether to buy NAB for a dividend or whether WES or WOW is the better stock. As I wrote in the newsletter this week - a growth investor has to have a meaningful exposure to Technology long term. Companies with global reach are the focus. Tencent taking a stake in APT confirms its global relevance. We don’t have the technology behemoths that the US has but we do have some exposures and they are now all neatly corralled for us in the ASX ALL TECH sector (which now has its own ETF). We should all keep a list of the Australian technology stocks on our desk long term. The right technology businesses have the opportunity to grow their businesses globally and exponentially. It makes investing in Woolworths and Coles look so pedestrian. As a growth investor you have to embrace that. The fact that many of these companies are not ‘index relevant’ in Australia is good. They are not on all institutional radars. But when Afterpay is the biggest company in Australia…the big funds and the traditional buy & hold investors will wake up. And if you think that’s a stupid comment let me point out, Atlassian if it was listed here would be the 5th biggest company in Australia with a market cap bigger than WBC, NAB, ANZ, WOW and WES, and Paypal would be the biggest company in Australia worth 60% more than either BHP and CSL.

--- I'm back - Plenty of food for thought there.  Marcus is plugging ASX-listed tech stocks there - like the WAAAX stocks (WiseTech, Afterpay, Altium, Appen & Xero), but I think it also highlights that we don't have many companies that compare favourably with the massive global digital platform companies and the global cloud-computing and data-storage giants that are listed in the USA and a couple also in China (Tencent and Alibaba).  With the exception of Amazon (which Hamish has not bought based purely on valuation grounds) you can get access to most of those via a Magellan fund because Hamish plays those themes.  You could also buy the Betashares NASDAQ top-100 ETF, NDQ, but I would be willing to make a small wager that MGG or MHH will outperform NDQ over most reasonable time periods.  Hamish does add value with his stock selection as well as his buy/sell timing.  

[Disclosure:  I currently hold MGG and I have bought MGG & MHH for my kids.  I don't currently hold MFG or any of the WAAAX stocks.]

28-Feb-2020:  Sydney Morning Herald: Why Magellan's Hamish Douglass is hunting for more customers

06-May-2020:  Magellan Funds Under Management - April 2020

Magellan Financial Group (MFG) are the manager of both the listed and unlisted Magellan funds in Australia, including the two LITs (listed investment trusts) MGG & MHH.  MFF Capital Investments (MFF) however is managed by Magellan's co-founder Chris Mackay, who works in the same building as Hamish Douglass and the Magellan team, but does his own thing with that one fund.  Chris holds more retailers and US Banks than Hamish does, Chris is more old-school.  Hamish is more new tech, global megathemes like the shift to cloud computing, big data, global digital platforms and global digital payment systems. 

Hamish Douglass, co-founder of Magellan and the CIO of all of the Magellan funds here in Australia (except for MFF which is not actually a Magellan fund any more) holds all of the FAANG stocks except for Amazon.  While he believes Amazon is one of the five best companies in the world, Hamish can't justify paying the asking price for Amazon shares.  He doesn't hold them purely on valuation grounds.  It's instructive I think to look at Magellan's FUM over the past few months to see how Australia's largest global funds manager (who usually manages over $100 billion) has done in terms of performance, inflows and outflows.  It should be noted that MGG and MHH are both closed-end funds, so there are no inflows and outflows (unless they pay distributions, have an operating distribution reinvestment plan, or raise new capital and issue new units as a result of those raisings).  The inflows and outflows relate to Magellan's open-ended funds, their more traditional managed investment funds.

• MFG's FUM (funds under management) at Jan 31 was $104,311m ($104.3 billion).
• Feb 29, FUM = $100,650m, so they lost $4.114m ($4.1 b), offset by $453m of net inflows, including $60m of net retail inflows.
• Mar 31, FUM = $93,991m, so they lost $7,128m ($7.1 b), offset by $469m of net inflows which consisted of $772m of institutional inflows and $303m of retail OUTflows.
• Apr 30, FUM = $96,973m, so they gained $2,164m ($2.2 b), which includes $818m of net inflows, with $175m of that being from retail investors.

Summary: 

They have had net inflows every month, and retail net inflows every month except March, although they still had net inflows in March because of the institutional inflows being greater than the retail outflows.  It's a testament to their strength and standing that they have NOT suffered net outflows from their open-ended funds in any month this year.

The greatest drawdown in terms of FUM was in March obviously, and it was all due to the value of their investments falling.  From the end of January to the end of March, their FUM dropped by less than 10% - it was down -9.9% from $104.3 billion to $94 billion, however, it rose +3.2% in April, leaving their April 30 FUM only -7% below their January 31 FUM.  No doubt their continuing net inflows every month have assisted with that performance, however I also think that their portfolio repositioning as well as the strength of their underlying core holdings has a lot to do with it.

A lot of the work they did in March was explained here:  02-Apr-2020: Magellan Global Markets and Portfolio Positioning Updates

Disclosure:  I hold MGG and I also hold some MHH for my kids.  I don't currently hold MFG, as holding the manager as opposed to the funds they manage is a different proposition - as returns from holding the manager will depend quite a bit on the level of performance fees they can generate.  However I have held MFG in the past, and it has been a profitable investment - I just bailed too early because I thought they looked overvalued.  They went on a LONG way further north after I sold out however.  Looking at the relative values now, I still prefer MHH (they haven't bounced back up as far yet), followed by MGG, followed by the manager, MFG.  However, they are different.  MHH is a more concentrated version of MGG (MHH hold less companies in their portfolio), and MGG have a higher distribution yield target than MHH.  MFG is of course not a fund but a fund manager, so a different investment entirely.  They all look reasonable, but best bought on further market weakness.  So - if we get another decent pullback, I'll probably be loading up on one or more of MHH, MGG or MFG (the manager of the other two).

01-Apr-2020:  Magellan Global Markets and Portfolio Update - 1 April 2020

08-April-2020:  Hamish Douglass: The three key issues in the COVID-19 outlook

"We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten." - Bill Gates

Magellan vs Platinum,   or   Hamish Douglas vs Andrew Clifford: 

17-Sep-19 - The two CIOs of our two most prominent ASX-listed global funds management businesses (MFG & PTM) have been doing a few odd joint interviews over the past year or two, and this one is a good one.  In this "Livewire Live 2019" piece, Patrick Poke from Livewire Markets reviews the latest joint interview between those two CIOs whose views are often very, very different (but who both own Ali Baba, the "Amazon of China"; in fact, Magellan are a top-10 shareholder of Ali Baba).

https://www.livewiremarkets.com/wires/magellan-and-platinum-10-years-from-now-this-is-how-the-investing-world-has-changed

If you want to skip to the video - click here:  https://youtu.be/7Mp2gctWb6k

I always think that Hamish Douglass comes off looking and sounding far better than Andrew Clifford does whenever they go head to head, but good on Andrew for having a go once more.  It is interesting how they have similar ideas or viewpoints on some things, such as the opportunity that exists in the rise of the Chinese consumer (& associated consumer expenditure in China) but how they tend to approach participation in that theme in completely different ways (- for the most part, except for Ali Baba clearly, which they both hold).  Anyway, I strongly recommend watching this video. 

Magellan has two key consultants on the topic of interest rates; Kevin Warsh, a former Federal Reserve member who may serve as the next President of the Fed, and none other than Janet Yellen herself, the previous President of the Fed.  Hamish says their advice played a role in him adjusting his views on rates. He now sees three percent as a base case for long term rates, but says that scenarios between zero and two percent shouldn't be ruled out.  These sort of insights have implications for the Australian market as well of course. 

Andrew's view is that negative interest rates are unsustainable and could destroy the banking sector in some countries, so he believes that central banks have done about as much as they can and we're going to get fiscal stimulus in a range of countries and regions and that could lead to increased demand for materials and that in turn could lead to inflation which would support higher rates.

Hamish says that, above all, locking yourself into one view and one position is dangerous and you have to be ready to adapt quickly, because while it's good to have a view (and they have a view) on what is most likely to happen, you have to keep in mind that a range of other eventualities is entirely possible.  He also said that while he has the best advisers, his team doesn't always agree with them either.  So, have a view based on good, sound reasoning, and position accordingly, but don't be locked in to that position - be ready to adapt - and fast, because things can and do change, and sometimes very rapidly.  Very good reading/viewing!

11-Mar-2020:  Firstlinks: Douglass on coronavirus: 'Expect volatility but don't panic'

"Expect volatility but don't panic, would be my view, because before 12 months, I think we'll be looking back, and this event will have passed."

This is the view Magellan's Hamish Douglass delivered to the thousands of investors who packed Sydney's International Convention Centre on Friday night [06-Mar-2020] to hear his latest update.

With fears about the coronavirus pushing stocks closer to a bear market, Douglass adopted a relaxed tone, telling investors to sit tight and take a long-term view. He told the crowd of advisers, industry professionals, retail investors and students.

"Our best view is that this may be six times as serious as the seasonal flu.

"While [the virus] is going to affect a lot more people, I think the spread may well be less because of the extreme containment measures. But with the extreme containment measures is going to come a pretty sharp economic impact around the world, which will realistically be three to six months.

"During that period, I would expect a lot of share price volatility as people react to the headlines. I think if we look a little bit longer out, this flu or pandemic or whatever you want to describe it will have its consequences. But the economic effect is likely to pass very quickly."

Douglass avoided discussing the virus for much of the presentation, devoting his time on stage to how interest rates will affect equity valuations and the rise of the Chinese consumer.

But talk of the virus, which dominated headlines for the days leading up to the event, infected audience question time.

[...Click on link above for more...]

Also includes the Magellan Global Fund Portfolio Top 10 Holdings, as at 31/12/2019. 

Hamish is very keen to have exposure to cloud computing and the global data storage giants who dominate that space.  Magellan isn't invested in Amazon (on valuation grounds only, other than that Hamish loves the business) but the other three main players in that space are Microsoft, Alibaba and Google (Alphabet), which are all core holdings across the various Magellan funds, including MHH & MGG.  Tencent are the second largest player (in cloud) in China, and growing fast, and Magellan have recently taken a substantial position in Tencent also.  Hamish likes playing global megatrends, and the shift to the cloud is certainly one of those.

Another theme he loves is global payment systems, and the most obvious two are Visa and Mastercard (both are Magellan holdings), but not so much in China - as explained here:  https://www.bloomberg.com/graphics/2018-payment-systems-china-usa/

In China, the payment systems are dominated by Alipay (owned by Alibaba) and WeChat Pay (owned by Tencent), and Alibaba and Tencent are also now core Magellan holdings.  Incidentally, those two companies also happen to be the largest two positions in Platinum's Asia Investments LIC (ASX: PAI).  If you look at those sort of companies - fast growing with massive tailwinds, you can see why it's not too hard for Hamish to take a longer term view of the market and see through this volatility to a time when things once again normalise and those companies continue to grow at a very good clip.  I think he's quite brave to put some numbers around how long that will take, and he could well be wrong about those predictions (underestimating the effects and the time it will take) - but his message is spot on regardless, which is that - this too will pass.  

16 July 2019:  https://www.livewiremarkets.com/wires/hamish-douglass-new-fight-plan