Australian chief executives – particularly in the staid and currently scandal-ridden financial services industry – aren’t known for their showmanship. The one glaring exception is Hamish Douglass.
Beloved by financial planners, bemoaned by rival fund managers, Douglass is the public face of Australia’s $75 billion investment powerhouse Magellan, and is known for his unusual (some would say shameless) publicity stunts.
Think appearing before thousands of people dressed in a black skivvy and blue jeans in a homage to Apple founder Steve Jobs.
Douglass announced he would step down as chief executive of Magellan on Thursday. But in stark contrast to the typical market reaction when a star CEO resigns – shares in Magellan’s listed holding company actually soared.
That may be in part due to some short-sellers closing out their bets against the company’s share price. And also because Douglass isn’t leaving the firm altogether, simply switching to the chairman seat and refocusing his attention on investing rather than management.
He will keep the chief investment officer role, and retain responsbilities for Magellan’s flagship global equities funds. He will also remain the company’s chief showman, and is expected to play that role at its upcoming roadshows, which will be attended by thousands of financial planners around the country.
Douglass’ marketing stunts may well be cringeworthy, but they have undeniably been effective.
Over the past decade, Magellan has amassed $75 billion in funds under management. Over the past five years, the share price of its holding company is up 174 per cent, compared to 18 per cent for the broader ASX/200 Index. Its market value is now above $5 billion.
Not bad for a period that has seen many fund managers suffer substantial outflows, and face fee pressure, due to the rise of low-cost passive investment options such as exchange traded funds.
But admittedly, Magellan’s rise has also taken place against the backdrop of a major bull market run. How it fares in a tougher environment, which will invariably come, remains to be seen.
Rival fund managers (as you would expect) and other obserbers privately describe Magellan as more brilliant at marketing than investing. The description “a very expensive ETF” was used by more than one market participant on Thursday.
Magellan’s recent marketing pitch has centred on its preferece for exposure to global, brand name stocks, including in the tech sector.
The thesis behind this approach is relatively sound – the Australian sharemarket is heavily weighted to financial services, mining and other oligoplies who are largely domestically focused.
That means investors who limit themselves to Australia are locking themselves out of some seismic themes: the growing dominance of global tech giants, rising wealth in China, for example.
But the delivery of this pitch – Douglass’ salesmanship – has rankled. Maybe it’s just tall poppy syndrome. Or maybe the critique is justified.
Magellan will be known to some readers as the naming rights sponsor during last summer’s Ashes Test cricket series. It dropped the $20 million sponsorship after the ball tampering scandal in South Africa rocked the nation.
Yet while Magellan had intregity issues with the Australian cricket team, it has had no qualms about investing in Facebook, the social media behemoth which has been beset by a series of privacy breaches and fake news scandals in recent times. (There was another one just this week).
Magellan is a top 25 shareholder in Facebook, and according to regulatory filings in the US, its position in Facebook was worth about $US2.6 billion at the end of June- its single biggest holding.
It also has large positions in coffee chain operator Starbucks, and various tech stocks such as Google-parent Alphabet, Windows maker Microsoft, database giant Oracle, and of course Apple.
Magellan is a top 50 shareholder in the iPhone making colossus – it even started buying shares before Douglass’ hero Warren Buffett (whose Berkshire Hathaway is now Apple’s biggest shareholder) did.
In a recent interview with this columnist, a Magellan portfolio manager remained upbeat on the stock. So while Douglass may no longer be CEO, the Jobs-ian attire could remain.
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