Magellan Global tops overseas shares manager list
Tuesday, 20 January 2009 12:30pm
In a market that fell by as much as 50 per cent last year, Magellan Global bucked the trend by posting a 1.3 per cent loss, pushing it to the top of the league tables of overseas shares managers for 2008.
As a fund manager that has only been around for barely two years, Magellan is far from a household name. But those who have been in the industry for a long time would have heard of, or done deals with, the fund's co-founders Hamish Douglass and Chris Mackay.
Both were involved in eight of the top 10 M&A deals in Australia in their previous roles. Douglas was formerly the joint head of global banking at Deutsche Bank Australasia while Mackay was the former chief executive and chairman of UBS Australasia.
It is this M&A background that helped Douglass, who manages Magellan Global, avoid the brunt of last year's market collapse.
According to the latest Mercer Data on fund performance, Magellan's 1.3 per cent loss is heads and shoulders above the next top performer, Walter Scott, which lost 11.6 per cent. It also did so much better than the worst performer, the Bernstein Strategic Value, which lost 43.7 per cent over the year.
The fund invests in a concentrated portfolio of 25 stocks in global infrastructure, financials and consumer staples sector. Douglass said it is because they know the financials sector in-depth that they were able to escape much of last year's pain.
"You would think that because we specialised in financials, we would be worse off but it was the insight we had in financials, and that we knew early on that the credit markets were leading the financial markets, that helped us [preserve investor capital]," he said.
For example, Douglass said the fund is overweight in consumer staples and reduced its financials allocation from 25 per cent of the portfolio in September last year to less than 5 per cent three months later.
More importantly, the fund sold its investments in financials at higher prices than when they bought them back in mid-2007, when the fund was launched. Douglass said they sold out of Bank of America, Wells Fargo and Lloyds TSB when these banks were trading at or near their record-highs.
Among the fund's stockpicks in consumer staples were Nestle, PepsiCo and Yum! Brands, which Douglass said will benefit from their market share and growth profile in the emerging markets. The fund also bought Google and eBay shares, which are currently trading at 14 and 7 times earnings respectively, a far cry from when these shares were trading at 50 to 200 times PE multiples.
"Google is like the TV network of the 21st century…as for eBay, a lot of people think of it as an auction site when it fact it has three business streams and is doing really well," said Douglass.
On the whole, Douglass expects 2009 to be a tough market so the fund will maintain its cautious strategy. "We were very risk averse throughout 2008...and we expect 2009 to be challenging too."
Michelle Baltazar
