Magellan Financial has said its A$5.3 billion global equities funds will now be managed by Vinva Investment Management, with shares falling 7.1%.
Magellan’s Global Fund strategies will be included in Vinva’s Global Alpha Strategy from early June, pending sharemarket approvals. It will also end all performance fees for the funds.
“Today's announcement reflects our commitment to putting clients first and our insight into client needs today and in the future. We have carefully considered this decision and are prioritising client outcomes whilst at the same time positioning Magellan for long-term growth, with an attractive core global equities offering,” said Magellan CEO and managing director Sophia Rahmani.
The company will cut the funds’ management fees from 1.35% per year to 0.89%, which it called “a key component of enhancing each Fund’s value proposition”.
“The appointment of Vinva – a high-quality investment manager with a strong track record of long-term outperformance for clients – alongside the reduction in Fund fees, strengthens the competitiveness of our global equities offering,” said Rahmani. Magellan holds a 28% stake in Vinva’s parent.
According to Magellan, it expects an average fee reduction of 0.55% after management is transferred to Vinva. It has projected yearly direct cost savings of $7 million, driven by downsizing its Global Equities team and lower fund administration costs.
Magellan has struggled with outflows in recent years, reporting $1 billion in net outflows in March.
The decision also comes ahead of Magellan’s merger with investment bank Barrenjoey, though Rahmani said the merger was not the reason for transferring the funds’ management.
The companies announced the merger in March. Magellan currently owns a 36% stake in Barrenjoey.
Shares in Magellan (ASX: MFG) were trading 7.1% lower at $9.60 by 3:55 pm AEST. Its market capitalisation is $1.78 billion.
