Magellan Bucks Shift To Passive Investment

‘Money makes money’ ought to be a slogan Magellan Financial Group quietly promotes. Just take its 2018-19 results – higher profit, higher dividend (the share price is already sharply higher over the past year) and the company has its hands out for another $275 million.

And it will no doubt be knocked down in the rush of investors of all size wanting to climb aboard the Magellan growth and money story.

The capital raising was announced with the results and news that Magellan plans a new ASX-listed investment trust.

Shares in the global funds manager were placed in a trading halt ahead of the announcement on Tuesday.

Magellan said the placement would strengthen its balance sheet and provide it with the flexibility to continue to invest in growth opportunities.

“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,” chairman Hamish Douglass said in a statement.

The institutional placement of $55.20 per share a skinny 6% discount on the dividend-adjusted closing price of $58.72 on Monday.

The money will be used to help meet the expected costs associated with the Magellan High Conviction Trust initial public offering.

The firm said the new trust will invest in Magellan’s “eight to 12 best ideas” and will follow a similar partnership approach to the Magellan Global Trust, which was listed on the ASX in October 2017.

Magellan said it will also use $50 million to support a new retirement product, which is currently under development.

In its earnings release, Magellan said it boosted net profit 78% to $376.9 million in the year to June 30, while revenue jumped a solid 36.4% to $617.4 million.

Average funds under management increased by 28% to $75.8 billion.

The company will pay a final dividend of $1.14 per share, 75% franked and up from a fully franked 90 cents a year ago. Total for the year is 189.8 a share, up from 134.5 cents a share.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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