Hamish Douglass, Australia’s most successful fund manager, has substantially increased the cash position of his flagship actively managed ETF, the Magellan Global Equities Fund (MGE).
At the end of February, Douglass (pictured) maintained a small cash position in MGE of roughly 5% – some of which would have been held to help meet investor redemptions.
By the end of March, however, the fund’s cash position increased to 16%, ASX disclosures reveal. The increased cash holding likely owes to a bearish view on the global economy, thanks to the coronavirus.
What exactly Douglass sold in order to raise the cash was not immediately clear. However, the disclosures reveal that Douglass completely sold out of Apple and CME Group, the Chicago exchange.
Magellan's other ETF, the Magellan Infrastructure Fund (MICH), which invests in global infrastructure companies, boosted its cash position a similar amount: from 3 up to 16%. The flight to cash comes despite global interest rates falling, which is often said to be good for infrastructure companies.
MICH is not managed by Douglass.
Australia’s most profitable ETF
The Magellan Global Equities Fund is, arguably, the most successful ETF in Australia. Under Australia's unique regulations, actively managed funds that do not reveal their portfolios can trade on exchange and be classified as ETFs.
Thanks to MGE’s record of beating its index, and thanks to Douglass’s high profile, the fund has attracted a flood of investor money the past several years, much of which has been from institutional investors.
TickerFund NameFUM ($M)Management feeRun rate revenue ($M)MGEMagellan Global Equities Fund1,6671.35%22.5IOOiShares S&P 100 Global ETF1,7430.40%7.0
The huge assets the fund has collected, together with the fund’s high fees (by ETF industry standards), have helped MGE generate more than $22 million a year in revenue. This puts MGE in a league of its own in revenue terms, making thrice the revenue of iShares S&P 100 Global ETF (IOO) – the nation’s second biggest ETF on a revenue basis. (Which has also, incidentally, outperformed).
Australian ETF providers that made it rich in 2018
Magellan's infrastructure ETF comes in as the nation's third most profitable fund, drawing in $6 million in run rate revenue. And this is before any performance fees are taken into account.
TickerFund NameFUM ($M)Management feeRun rate revenue ($M)MICHMagellan Infrastructure Fund5751.05%6.0COREETFS Global Core Infrastructure ETF200.45%0.09
Performance fees unlikely for H1 of 2020
However, there may be something of a limit to how much revenue MICH and MGE can generate this year.
With global stock markets rebounding strongly in April, it seems very possible that MICH and MGE will be unable to crystallise performance fees for the first half of 2020. This owes to the fact that the funds' heavy cash positions have meant they have not fully participated in rebounding global equity prices. Performance fees are calculated every six months – with the next calculation date being 30 June.
Magellan's share price, however, has mostly recovered and has returned to near all-time highs.
Source: Google Finance
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