Magellan funds record $331m profit

Magellan's funds management business topped last year's profits by 33% as Hamish Douglass' stable of well-performing funds continued to collect performance fees and new investor money.

Magellan's funds management business now has $59 billion funds under management - up 29% over last year.

Both retail and institutional investors were keen on the funds throughout FY18, contributing $1.9 billion and $2.5 billion in net inflows.

The funds management business generated $429 million in revenue (up 30%) and pre-tax profits of $331.4 (up 33%) in the financial year ending June.

Strikingly, performance fees grew by 83%, as the funds continued to perform well above their objective returns. Magellan Global Fund returned 16.9% in the year, above the stated 9% performance objective but also above 11.6% returns since its inception.

Magellan loosened its purse strings on marketing its funds, splashing out $11.1 million on it - up 266% over the previous year.

This spend has grown its brand awareness by 30% over the prior year in the self-directed retail channel.

What's next for Magellan?

Magellan said it has new products under development and is seeking to launch them in the next one to two years.

Its global infrastructure fund has $10.7 billion in remaining capacity while it is looking to continue to push its global equities strategy into the self-directed retail market.

Airlie Funds Management net inflows totaled $20 million for the period - this is less than 1% of Magellan's total net inflows of $4.4 billion for the period.

However, Magellan sees Airlie as a $3.25 to $5.5 billion opportunity, saying it can grab 5-10% of the $65 billion market opportunity in active unlisted managed funds.

The group is also pegging it's sustainable/low carbon strategy's theoretical capacity at $20 billion to $27 billion.

It took in its first client for the strategy last month in the Global Sustainable UCITS sub-fund.

These global and US strategies have exceeded return objectives in the running for 22 months and 19 months respectively, but the group says that it requires a meaningful track record, typically for a minimum of three years.

Magellan has also revised its dividend policy, flagging that future dividends will likely be partially franked as opposed to the current full franking.

The revised policy will pay out final and interim dividends based on 90-95% of profit after tax of the funds management segment (excluding performance fee) is expected to increase total cash dividend payout by 20% per annum, subject to regulatory approval.

Magellan Group, as a whole, brought in $452 million in revenue (up 34%), and $268.9 in profit after tax (up 37%).

Total dividends (cents per share, fully franked) were up 57% to 134.5.

Read more: Hamish DouglassAirlie Funds ManagementMagellan Group
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