Alongside its annual results which report a slight dip in net profit, Magellan Financial Group officially highlighted its plan to launch an initial public offering for a new ASX-listed investment vehicle.
The Magellan Global Trust will target a 4% cash distribution yield, paid semi-annually, through investing in a concentrated portfolio of global companies, with a possible cash allocation of up to 50%. Magellan chief executive Hamish Douglass and Stefan Marcionetti will act as the trust's joint portfolio managers.
The IPO will consist of a priority offer to 250,000 to 300,000 Magellan shareholders and retail investors and a general public offer. The priority offer will include a loyalty reward of additional units representing 6.25% of the units allotted to an investor. Magellan will pay for the one-off costs of this reward.
Douglass said: "We believe that the Magellan Global Trust will be an attractive vehicle for investors making an investment in global equities. We believe that many retail investors value regular cash distributions and this has been missing in many global equity products."
The trust represents the next phase of Magellan's ongoing push towards the retail market, underscored by the group's three-year partnership with Cricket Australia, which will see Magellan act as the naming rights sponsor for the Australian domestic Test series, commencing with the 2017-18 Ashes.
As revealed in the annual results, Magellan has increased its retail funds under management from $12 billion last year to $15 billion. This represents a dramatic upswing from the $4.5 billion sourced from retail investors in 2013. While institutional money still represents the majority of the firm's FUM ($35.4 billion as at 30 June 2017), these figures demonstrate Douglass' stated strategy to "increase our penetration with self-directed investors."
He said Magellan's marketing expenses will "increase materially" over the next financial year - to about $11 million - and will include, along with the Cricket Australia partnership, "a rollout of a brand advertising campaign to build awareness of and grow the market for investing in global equities."
Magellan attributed the rise in operating expenses - up from $74 million to $82 million - as the cause of its slight drop in net profit after tax, which fell by 1% to $196.2 million. These expenses included general employee costs, an increase in US marketing fees and an increase in occupancy costs as a result of the new head office premises in Sydney.
Commenting on the results, Magellan executive chair Brett Cairns said: "We must always look to improve and grow. This is important because there is a strong natural tendency over time to become stolid, allow bureaucracy to creep in and choke off thinking and ultimately become set in our ways. Undertaking new initiatives is just as important for our clients and our staff as it is for our shareholders."
"One thing we have firmly in our minds, however, is that we cannot trick ourselves into believing the success of any initiative we undertake is a certainty, irrespective of how confident we are, or how much work we put in. Bertrand Russell got it right when he noted that 'not to be absolutely certain is one of the essential things in rationality,'" Cairns said.