NOTE FROM THE CHIEF EXECUTIVE OFFICER
Magellan Financial Group is an Australian-based specialist funds management group.
Magellan’s primary operating business, Magellan Asset Management, has established two globally-focused investment funds for Australian and New Zealand high net worth and retail investors; the Magellan Global Fund and the Magellan Infrastructure Fund. We also currently offer a limited number of globally-focused investment funds for institutional investors and may, in future, offer further managed investment funds in the global equity space.
My business partner and our Chief Investment Officer, Chris Mackay, and I believe that a compelling case exists for Australian and New Zealand investors to diversify part of their wealth into high quality, global investment opportunities.  It is important for Australian investors to recognise that Australia only represents approximately 2.5% of the global MSCI index. The Australian stock market is relatively concentrated with financial companies, and resource and materials companies, which represent 42% and 20% of the market capitalisation of the Australian stock market respectively. On a global basis, these sectors represent approximately 26% and 6% of global stock market capitalisation. Chris and I believe that, by investing offshore, investors will diversify risk and vastly increase the number of available outstanding investment opportunities.
Magellan’s investment philosophy is straightforward. Each of Magellan’s funds will seek to invest in a portfolio of outstanding global companies assessed to have highly attractive business characteristics at a discount to our assessment of their intrinsic value. Chris and I believe that investing in a portfolio of outstanding businesses purchased at attractive prices will minimise the risk of permanent capital loss for our investors. We will not engage in speculative activity.
The fee structures of our funds will be aligned with the interests of our investors. As a general guideline, any performance fees will be subject to both absolute and relative performance hurdles, plus a high water mark requirement. There will also be a restriction on the payment of any performance fees such that a performance fee will only be paid to the extent that the net return after all fees, at least, matches the return from a relevant index. Whilst we strongly support performance incentives, Magellan will only receive these incentives when investors are truly better off.
Magellan is establishing itself as an independent specialist funds management group. To avoid conflicts of interest, the only form of remuneration Magellan will receive from funds it manages will be investment management and performance fees. Magellan will not charge any arranging, transaction, mergers and acquisitions, advisory or similar fees to any of its funds. We also strongly believe it to be contradictory to the interests of investors in our company and funds alike to accept €˜soft dollar’ payments from service providers and as such we will not accept such payments. We aim to be transparent in our dealings so that investors can be assured of our integrity in building a world-class funds management firm.
Chris and I have often been asked why investors should entrust their savings to a group run by two ex-investment bankers with no direct investment management experience. We believe this is a very fair question. In answering this question, we are guided by Benjamin Graham’s observation that “investment is most intelligent when it is most businesslike”. We believe it is fundamental to sensible investing to have a deep understanding of the economics, competitive advantages and business model of the companies in which you invest. Both Chris and I have run substantial businesses, have led two of Australia’s most successful advisory practices over the past decade or so and have between us advised many of Australia’s major corporations across many industries. We also believe that we bring skills in attracting and retaining outstanding people which is the key to a successful investment management business.
Most importantly, Magellan is establishing an outstanding team of investment professionals. In addition to Chris and myself, we have hired 12 investment professionals with a broad background of experience. We have also assembled a high calibre management team to ensure that Magellan has the operating and compliance infrastructure necessary for the establishment and development of the business.
Magellan’s other business is to consider investing in fund managers. We believe that the funds management industry is a highly attractive industry with high growth rates and almost infinite returns on capital. Notwithstanding these characteristics, the barriers to entry are extremely low and the barriers to sustained success are extremely high. The primary barrier to sustained success is the quality and integrity of the people. Magellan intends to only invest in a limited number of other fund managers, either via providing capital to seed a new business, acquiring an interest in an established funds management business or establishing a joint venture.
If you come across excellent fund managers who may be interested in partnering with us, please let either Chris or me know. Magellan’s phone number is +61 2 8114 1888.
Hamish M Douglass
Managing Director and Chief Executive Officer, Magellan Financial Group

Note from the Chief Executive Officer

Magellan Financial Group is an Australian-based specialist funds management group.

Magellan’s primary operating business, Magellan Asset Management, has established two globally-focused investment funds for Australian and New Zealand high net worth and retail investors; the Magellan Global Fund and the Magellan Infrastructure Fund. We also currently offer a limited number of globally-focused investment funds for institutional investors and may, in future, offer further managed investment funds in the global equity space.

My business partner and our Chief Investment Officer, Chris Mackay, and I believe that a compelling case exists for Australian and New Zealand investors to diversify part of their wealth into high quality, global investment opportunities.  It is important for Australian investors to recognise that Australia only represents approximately 2.5% of the global MSCI index. The Australian stock market is relatively concentrated with financial companies, and resource and materials companies, which represent 42% and 20% of the market capitalisation of the Australian stock market respectively. On a global basis, these sectors represent approximately 26% and 6% of global stock market capitalisation. Chris and I believe that, by investing offshore, investors will diversify risk and vastly increase the number of available outstanding investment opportunities.

Magellan’s investment philosophy is straightforward. Each of Magellan’s funds will seek to invest in a portfolio of outstanding global companies assessed to have highly attractive business characteristics at a discount to our assessment of their intrinsic value. Chris and I believe that investing in a portfolio of outstanding businesses purchased at attractive prices will minimise the risk of permanent capital loss for our investors. We will not engage in speculative activity.

The fee structures of our funds will be aligned with the interests of our investors. As a general guideline, any performance fees will be subject to both absolute and relative performance hurdles, plus a high water mark requirement. There will also be a restriction on the payment of any performance fees such that a performance fee will only be paid to the extent that the net return after all fees, at least, matches the return from a relevant index. Whilst we strongly support performance incentives, Magellan will only receive these incentives when investors are truly better off.

Magellan is establishing itself as an independent specialist funds management group. To avoid conflicts of interest, the only form of remuneration Magellan will receive from funds it manages will be investment management and performance fees. Magellan will not charge any arranging, transaction, mergers and acquisitions, advisory or similar fees to any of its funds. We also strongly believe it to be contradictory to the interests of investors in our company and funds alike to accept soft dollar’ payments from service providers and as such we will not accept such payments. We aim to be transparent in our dealings so that investors can be assured of our integrity in building a world-class funds management firm.

Magellan’s other business is to consider investing in fund managers. We believe that the funds management industry is a highly attractive industry with high growth rates and almost infinite returns on capital. Notwithstanding these characteristics, the barriers to entry are extremely low and the barriers to sustained success are extremely high. The primary barrier to sustained success is the quality and integrity of the people. Magellan intends to only invest in a limited number of other fund managers, either via providing capital to seed a new business, acquiring an interest in an established funds management business or establishing a joint venture.

If you come across excellent fund managers who may be interested in partnering with us, please let either Chris or me know. Magellan’s phone number is +61 2 8114 1888.

Hamish M Douglass

Managing Director and Chief Executive Officer, Magellan Financial Group