from the AFRFund manager Geoff Wilson says Magellan Financial...

from the AFR

Fund manager Geoff Wilson says Magellan Financial Group could be a target of Wilson Asset Management’s Strategic Value listed investment company, known by its ASX code WAR, if Magellan’s shares continue to slide.

Wilson Asset Management chairman Geoff Wilson. James Alcock

WAR doesn’t own Magellan shares today, but Mr Wilson told clients on Thursday that it would be “the type of thing we get involved in”.

Magellan fell to a decade low of $8.49 on Wednesday. The investment manager is facing an uphill battle to repair its reputation with investors and clients as outflows continue.

“Occasionally, we will take a position in operating businesses,” he said.

“We talked about AMP, Lark is another one, and yes, in theory … Magellan, the operating business, the management company, I think the assets are worth $4.50 or $5.

“If they were trading below that, or if we valued the operating business at something, that’s the type of thing we could get involved in as well.”

WAR aims to drive returns by helping unloved LICs find ways to close the gap between their net tangible asset values and their share prices.

Magellan’s High Conviction Trust was among its first holdings, when it was trading at a 12 per cent discount to its net asset backing at the time.

Current holdings include the Magellan Global Fund, Regal Asian Investments and Qualitas Real Estate Income Fund.

WAR also holds a large position in one of WAM’s own listed investment vehicles, WAM Global, which is trading at a steep 15.5 per cent discount to NTA.

“With Lark, it’s a discount-to-asset play,”

“It was a company in turmoil, the CEO left under strange circumstances. There has been more volatility since then. We’re watching it closely. Whether we build it into a bigger position or not, the jury is still out, but you could argue that the value of its assets could be twice the current share price.”

WAR trades at a 12 per cent discount to NTA and its shares are 19 per cent off the 2021 issue price.

Mr Wilson defended the poor performance, saying shareholders need to give the strategy time.

“It’s a very specific strategy ... it’s buying undervalued assets ... for those underlying assets to be realised, it’s a medium-term strategy,” he said.

“Very rarely you buy a company and the next day they announce something and then you get out at NTA.

“The underlying portfolio will perform, but it just takes a bit of time. It is disappointing, personally and for everyone involved.

“We’d all like it to be trading at a good premium to where we put the money in, but that’s not the case, but we will get there, I’m confident.”