Magellan shares sink after key UK client St James’s Place pulls funds

Mr Ler said the mandate loss could cause Magellan’s other 150-odd institutional clients to reassess their relationship with the fund manager. “The main concern is not the SJP, it is what does this mean for the other institutional mandates? That’s still uncertain.”

SJP operates a multi-manager investment strategy and has long been one of Magellan’s most lucrative clients. SJP recently put Magellan on notice after poor performance from its global equities fund. SJP’s website states it can terminate mandates “at short notice if we have lost confidence in them without any charges, or tax, or inconvenience to our clients”.

Earlier this month, Magellan’s chief executive Brett Cairns resigned abruptly citing “personal reasons” and Mr Douglass was later forced to disclose he had separated from his wife.

ECP Asset Management chief investment officer Manny Pohl, who has owned stock in Magellan since inception, said investors should have been provided with more information during this period of volatility.

“Having the CEO leave when he did, then a massive loss of contract. There’s something going on. That’s what concerns me,” Dr Pohl said. “If someone leaves immediately, it suggests there has been a massive disagreement that couldn’t be resolved. To me, there’s a cloud that says we need to know more about what’s going on because of the sequence of events that have occurred.”

Magellan’s share price is now down more than 60 per cent over the past 12 months. Confidentiality agreements around Mr Cairn’s departure were not a good enough reason to deflect accountability, Dr Pohl said. “Companies that are listed, you need to tell shareholders what is going on.”

Magellan has not provided any information about why SJP terminated the longstanding contract. Dr Pohl said it could be related to pricing, although added Mr Douglass’ counter-cyclical investment strategy had started to raise concerns.

“Hamish has always hung his hat on the fact he outperforms in down markets,” he said. “The problem is the underperformance this time around has just been too long.”

Morningstar will now reassess its valuation of Magellan, although Mr Ler said the market had already priced in a “doomsday scenario” and “armageddon” and he now believes the stock value is under-priced.

Mr Ler said asset consultants could view these developments as evidence of instability within Magellan but said Mr Cairns’ resignation should not impact the fund’s performance. “Brett Cairns is not an investment guy, the investment team is still in Magellan.”