Market darling Magellan sails through troubled markets with stellar result

Market darling Magellan sails through troubled markets with stellar result

Investor optimism has added $6.5 billion to Magellan Financial Group's (ASX: MFG) market capitalisation since February, and today the Sydney-based investment fund returned the favour.

The company has reported a 35 per cent lift in net profit after tax (NPAT) to $364.2 million in FY19, and is giving some of that back to shareholders through a 24 per cent boost in its second half dividend.

Magellan's average funds under management (FUM) are up 28 per cent at $75.8 billion.

"It has been a successful year for Magellan. Strong investment performance has led to a 28% increase in average funds under management and as at 30 June 2019, Magellan managed $86.7 billion on behalf of our clients," says CEO Brett Cairns (pictured).

"Strong growth in average funds under management led to a 22% increase in management and services fees to $472.5 million and a 35% increase in adjusted net profit after tax to $364.2 million."

The group is also using these strong tailwinds to launch the new Magellan High Conviction Trust along with a $275 million placement.

The Magellan High Conviction Trust will invest in the group's eight to 12 best ideas, and will replicate an investment strategy that has returned 16.6 per cent per annum net of fees since inception in July 2013.

"We are excited about making Magellan's High Conviction strategy available to investors via an ASX-listed investment trust," says Cairns, claiming the trust will be a "high quality option" for investors seeking global diversification.

Magellan is not appointing a broker syndicate and is not paying any fees or commissions to brokers or advisers to handle the raising.

"We are addressing potential concerns regarding conflicted remuneration by proceeding without appointing a broker syndicate or paying any fees or commissions to any brokers or advisers to handle the Offer," says chairman Hamish Douglass.

"Instead, Magellan is offering directly to investors who subscribe for units in the Offer the right to receive additional units worth either 7.5% or 2.5% of their allotment depending if they subscribe under the priority offer or wholesale/general public offer.

"We believe the unique Offer structure is a win-win outcome for investors that participate in the raising and for Magellan shareholders."

Douglass himself intends to take up his priority offer and additionally subscribe for $20 million worth of units under the wholesale offer.

The placement, made at a 6 per cent discount, will help cover the costs of setting up the trust as well as around $50 million to support a new retirement product currently under development and to seed other investment strategies.

"The $275 million placement will strengthen Magellan's balance sheet and will provide us with significant flexibility to continue to invest in growth opportunities," says Douglass.

"Every dollar we pay upfront to people investing additional capital into ASX listed funds like the Magellan Global Trust or the Magellan High Conviction Trust has resulted in materially more than two dollars of shareholder value to date.

"We have only scratched the tip of an iceberg on the potential of our partnership thinking and I would envisage us making more investments in the future."

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