Australia’s Magellan says $1 billion outflow due to client liquidity issue

SYDNEY (Reuters) – Australian fund manager Magellan Financial Group said a big client had redeemed about $1 billion in September to satisfy liquidity requirements as markets reeled late in the month, sending Magellan shares on a nosedive to a nearly nine-year low.

Magellan reported A$3.2 billion ($2.1 billion) in institutional outflows last month and said in a statement that about half of it related to “liquidity requirements of a client impacted by global market volatility in late September”.

Magellan gave no further information about the client or the nature of the volatility, though the timing coincided with a wild selloff in British assets – particularly gilts and the pound – after Britain announced a raft of unfunded tax cuts.

Many British pension schemes have large exposures to gilts and faced margin calls on derivatives positions, forcing the sale of liquid assets.

Months of net outflows, poor investment performance and the departure of star fund manager Hamish Douglass has hammered Magellan stock this year. It fell 8.4% on Thursday in a steady broader market and the stock price has halved this year.

($1 = 1.5347 Australian dollars)

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