George quits as Magellan CEO in another blow for embattled fund manager

Magellan Financial Group (ASX: MFG) is back on the hunt for a new CEO after announcing the departure of David George who was just 15 months into the role, in another blow for the embattled funds manager.

The company announced that George has stepped down from the top job effective today, although he will remain available until the end of the year to advise the company while a replacement is found.

In the meantime, chairman Andrew Formica will take on the executive chair role in the wake of the shock departure amid a continued decline in Magellan’s earnings performance and funds under management over the past year.

George, who came to Magellan with 20 years’ experience at the Future Fund including his previous role as deputy chief investment officer, took the reins on 19 July last year and set out a five-year plan to restore confidence in the company with a view to driving funds under management back to $100 billion.

It was a tough job ahead with Magellan recently reporting funds under management in September of $35 billion, down from $39 billion in August. At the end of June last year, the figure stood at $61.3 billion.   

Magellan, which announced George’s exit from the company to the ASX this morning, has not offered a reason for his sudden departure.

“The board, in consultation with David, believe it is time to refocus leadership which will accelerate the progress made to date,” says Formica.

“The board remains focused on the delivery of exceptional investment performance for our clients and are well positioned to continue to explore organic and inorganic growth opportunities.

“I am personally committed to the task of leading Magellan until such time that a new CEO can appointed.”

The company’s board expressed its gratitude for George’s contribution ‘during a challenging time for the business’ and acknowledged his role in ‘stabilising and improving the core funds management business, defining a strategy to diversify the business and establishing new products and enhancing client solutions’.

In a brief statement, George says: “Magellan remains a great business and I have been proud to support our team in driving better investment and client outcomes. I continue to believe Magellan has a bright future ahead.”

George was appointed CEO following the departure of Brett Cairns six months earlier at the end of 2021. Cairns, who joined Magellan in 2007 shortly after it was founded by Hamish Douglass and Chris Mackay, led the company for two years as CEO and three years prior to that as executive chairman.

In the wake of George quitting, Magellan has moved to firm up its employee retention program by paying out existing employee share purchase plan (ESPP) loans which the company say will add about $2.5 million to the company’s cost base in FY24.

Magellan now estimates its cost base for the year will land between $97.5 million and $102.5 million.

“Our immediate focus is on ensuring we retain, attract, and appropriately incentivise our talent to drive performance excellence,” Formica says.

“An important step in achieving this is to address the existing ESPP loans and we are pleased to today announce that additional retention payments will be made to close out the ESPP loan balances for the majority of staff by September 2025.”

Magellan says the payments will be partially offset by a cut in previously announced retention payments of about $1.3 million to key management personnel.

“We have also commenced work on the development of a new employee accountability and alignment model to provide our people with short term and long-term incentives that are aligned to delivering positive client and shareholder outcomes, which we expect to be in place by 30 June 2024,” Formica says.

“With the board renewal process now complete, and following today’s announcement, the business is positioned to continue the journey to restore Magellan to its place as one of Australia’s leading fund managers.”

Magellan’s shares were trading more than 5 per cent lower at $6.19 at 10.29 (AEDT) following today’s announcement.