He may not want to take up the chief investment officer role but choose to limit his bailiwick to offshore share investments.
Douglass is the co-founder and a large shareholder in Magellan but the firm needs to adopt a more traditional approach to governance structure.
His departure triggered the loss of institutional mandates that Magellan hopes will return when Douglass does. But there is no guarantee they will and the company cannot afford to manage around Douglass.
The governance upheaval and underperformance from Magellan’s flagship international fund is another reason the company’s funds under management have fallen by 40 per cent in the past six months.
The share price had already fallen 47 per cent from its peak before the departure of Cains sparked the management shake-up. The combination has triggered some ratings agencies to downgrade Magellan – which acts as a deterrent to the growth in inflows from retail investors.
Chris Mackay has taken over portfolio duties in the absence of Hamish Douglass.Credit:AFR
Parachuting Magellan’s co-founder Chris Mackay into the breach has been well received by investors but his hasn’t stemmed the outflow of funds. Thus, assuming Douglass returns it will be a slimmed down version of the Magellan he left.
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In its most recent notice Magellan said its funds under management had fallen to $69 billion down from about $117 billion towards the end of 2021. The company is clearly hoping that velocity of outflow will slow eventually but when and where it will land is unknowable.
Based on the past six weeks of outflows it would be reasonable to assume funds under management will have halved from last year’s peak. In turn, the value of funds under management determines Magellan’s earnings.
For investors in Magellan shares, the value of the company is a moveable feast.
While shareholders were impressed by the company’s most recent generous dividend and last week’s announcement of a share buyback the true performance of the company is measured by the performance of its funds.
It is only sustained outperformance that can turn net outflows to inflows.
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