Last year Magellan opted to find the anti-Douglass in its search of stability, and they found him in George. He hailed from the Future Fund, which is the epitome of safe, considered and risk averse, and is known for its passive equity investing.
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The contrast with Magellan’s active big bet investment style could not have been more marked.
It is now Formica’s job to find the Goldilocks candidate to run Magellan – not too much of a rock star and not too backstage workmanlike.
He wants someone who will keep the wheels turning but who backs the board’s plans to grow the business through acquisitions rather than stabilise it.
But in ushering George out the door, Formica has shown he is prepared to have Magellan move through another point of instability.
It has been characterised as a mutual decision, but history shows that these moves are led by one party, and in this case it looks to be the board rather than George.
While George may have not been a cultural fit at Magellan, he is highly regarded in investment circles and his departure won’t be greeted well by all shareholders.
Over the past year, funds under management have continued to decline. From the peak of $117 billion in late 2021, funds under management have fallen to $35 billion as of September this year. But most of this damage occurred before George joined Magellan and a large number of mandates were lost because Douglass, and more recently the head of Australian equities division, John Sevior, left.
George hasn’t really done much wrong, other than placed a target to grow funds under management to $100 million. He didn’t really nominate a time frame but as funds continue to fall, this objective looked increasingly fanciful.
Magellan was created and grew through its adolescence under Hamish Douglass.Credit: Janie Barrett
Formica is against making such targets, which is probably wise. But his strategy to buy smaller competitors may not have sat well with George, given it was outside his area of expertise.
That said, Formica appears to be pretty happy with Magellan’s 36.4 per cent stake in upstart investment bank Barrenjoey, despite the industry’s quieter equity capital markets. But on retaining this investment, Formica is more equivocal.
“What they [Barrenjoey] have done in three years is phenomenal. For us to be associated with that is only a positive. Barrenjoey today is stronger than a year ago, and we expect it to be even stronger in a year’s time and in that sense we are a happy shareholder.
Where it fits within our business is something we always have to contemplate,” Formica said.
But the immediate task for Magellan is to “get back to our knitting”, according to the now executive chairman.
“Clients have been through a lot in a short space of time and we know they have other options. Delivering for them is absolutely our priority.”
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