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Magellan’s CEO transition seen as positive after George’s challenging tenure

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Magellan’s executive leadership restructure has not impacted its ratings.

On Thursday, it was revealed that Magellan nabbed Maple-Brown Abbott’s chief executive officer in a bid to revamp its image following years of turbulence, however, Morningstar confirmed a day later that this won’t impact the firm’s ratings.

Sophia Rahmani announced her resignation from the role of CEO and managing director of Maple-Brown Abbott after a four-year tenure just as Magellan separately confirmed she is set to become its new managing director from May.

Magellan’s executive chairman, Andrew Formica, said he will remain as the executive chair for an interim period to ensure the firm maintains continuity and stability, while Ms Rahmani will focus on the firm’s funds management business.

The announcement comes after group CEO and managing director David George, in October, confirmed his intention to step down after 15 months in the role.

Mr George made bold promises outlining his plans to restore Magellan’s former glory.

Namely, back in October 2022, Mr George said Magellan will be a fund manager of global scale once more with over $100 billion of funds under management after five years.

This was quite a promise for the embattled firm given its funds under management (FUM), at the time of Mr George’s confident remark, had more than halved to $50.9 billion as of the end of September from $113.3 billion at the same time last year.

Since then, Magellan’s FUM has suppressed further, reaching a low $34.3 billion on 31 October before rebounding slightly over the following months.

With new management at its helm and a few months of FUM increases, Magellan is optimistic about finally navigating towards greener pastures.

However, on Friday, Morningstar said that while “this appointment is an encouraging step forward for the group after the challenged period under David George’s leadership”, there will be no change in its ratings for the firm’s range of funds.

“There have been significant changes in responsibilities since Hamish Douglass relinquished his portfolio management duties in February 2022,” Morningstar said.

Among the personnel changes, the ratings firm highlighted Mr George’s decision to refocus the team on the flagship equities strategies, shutting down nascent research areas such as global small/mid and long-short, which resulted in a number of relatively senior redundancies.

Morningstar described Andrew Formica’s appointment in July 2023 as one that brought “much-needed funds management experience to the board”.

“The board has undergone a process of much-needed renewal, as the firm transitions from being founder-led to adopting more traditional listed fund manager structures.

“As of November 2023, the six-member board includes five non-executive directors, of which three have relevant financial-services experience, in addition to Formica.”

The ratings agency granted Magellan an overall ranking of average, along with similar assessments for “people” and parent”. Notably, it achieved an above average score for its “process”.

On Thursday, alongside announcing Ms Rahmani’s appointment, Magellan said its adjusted net profit after tax edged down 5 per cent in the first half of financial year 2024 to $93.5 million, following a 60 per cent drop a year earlier.

Average funds under management slipped again by 31 per cent to $36.9 billion, however, the fund manager has recorded several months of FUM growth following a long period of outflows.