Magellan Financial Group has made two significant acquisitions, which signal a new phase of growth as a diversified multi-style manager, backoffice services provider and distributor. Airlie Funds Management gives Magellan a quality Australian equities offering and Frontier Partners in Chicago gives it a standalone distribution business.
The founders of Airlie are John Sevior and David Cooper, who were joined by Matt Williams in 2016. They have about $6 billion under management and will now enter the retail market using Magellan’s backoffice and distribution experience through the launch of an active ETF.
Magellan is probably the most successful Australian funds management firm of the past decade, but the recent success of its Magellan Global Trust, a listed investment trust (LIT) which raised a record $1.57 billion, shows that the firm has to adapt with the times.
The interim results show that inflows from the wholesale – financial planner – market fell in the six months to December, mainly because many investors switched out of the unlisted unit trust products and into the LIT, but also because of the generally lower industry net inflows from advice groups.
Also, Magellan closed its global strategies to new institutional money at the end of December, although it has allowed current investors to reserve some of the remaining capacity. The firm expects a hard close in the next 24 months.
So, in order to continue its growth trajectory, Magellan is widening its product offering, with a new manager, extending its international distribution capability, and adding to its ASX-listed range of ETFs and other exchange-traded products.
Hamish Douglass, chief executive and CIO, told shareholders when releasing the interim results on February 6 that as of December 31, the new Magellan Global Trust and the firm’s three ETFs had combined funds under management of $2.8 billion and more than 50,000 unitholders.
He said a core focus of the self-directed strategy was to raise awareness of the Magellan brand and its expertise in global investing – hence the Cricket Australia sponsorship and television advertising throughout the recent Ashes series. Magellan has an option over two more years of such sponsorship.
The Frontier Partners acquisition is similarly interesting. That firm, which is well-known to the Australian institutional market as a third-party marketer, has in recent years branched out, owning a registered broker dealer and acting as advisor to mutual funds.
Its founder, Bill Forsyth, will become executive chairman of Magellan’s North American business. His team has raised $12.6 billion for Magellan since forming a partnership in 2011. Douglass pointed out to shareholders that his firm would be saving about $10 million a year in fees to Frontier following the acquisition.
– Greg Bright