Magellan projects - very interesting

Published in AFR Street Talk today

Is a twist on annuities the golden goose for Magellan?

By Sarah Thompson and Anthony Macdonald
Feb 12, 2019 — 12.15am

Ten years ago, Magellan Financial Group handed down an $11.9 million half-year loss and had $383 million in funds under management.
Fast forward to Thursday's results, and analysts reckon it'll have earned $168 million for shareholders in the six-months to December 31, and will have more than $70 billion of investments on its books.
It's been a remarkable rise - but one that's far from over, if you believe what you hear out of Magellan's Martin Place headquarters.

Magellan boss Hamish Douglass and his team are working on a few new strategies which, if successful, could prove quite revolutionary.  
Because it is understood Hamish Douglass and his team are working on a few new strategies which, if successful, could prove quite revolutionary.
The first is the firm's stated sustainable strategy, which was seeded in-house a couple of years ago and attracted its first external client in July 2018. Magellan reckons it's a $US15 billion to $US20 billion opportunity.

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However, it is the next leg that is being kept under wraps.
Sources said Magellan had ex-BlackRock operative Paddy McCrudden and Brett Cairns working on a post-retirement product, that could blow the market wide open.
They're said to be in talks with regulators - "twin peaks" the Australian Securities and Investments Commission and Australian Prudential Regulation Authority - with an income and retirement product that would be pitched at the country's ageing population.

As it stands, annuities are available via other avenues, but they're costly and Magellan reckons it might be able to come up with a more affordable option which would be annuity-like in nature but with a couple of twists. Magellan has had its new strategy in development for a couple of years, and is said to be six months away from the seeding stage.

It'll be interesting to see whether Magellan can make it work. The firm has had success with innovations in the not too distant past - including opening up the active ETF market - but annuities and annuity-like products are a notoriously tough nut to crack. They may make a lot of sense for Australians reaching retirement age, but they're proving very slow to catch on.
Further afield, Street Talk is tipping a long/short global equities strategy out of the manager, to be headed by Kris Webster. It's unlikely to be in the near term - Magellan has shown it likes to seed such funds in-house and run them for a couple of years before going public - and from what we understand there has been no move yet.