Magellan Financial Group Limited (MFG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I'm Hamish McLennan, Chairman of Magellan Financial Group Limited. On behalf of the Board, I welcome you to our 2022 Annual General Meeting, which is now formally open and there is a quorum present. I'd first like to acknowledge the traditional owners of the land from which I address you today, the Gadigal people of the Eora Nation and pay my respects to their elders past, present and emerging. The Board agreed would be appropriate to host this year's AGM as a hybrid meeting, so the shareholders have the choice to either attending in person or online by the Lumi platform. I remind all shareholders attending virtually that you will be able to vote and ask questions during today's meeting, and I'll provide instructions on how to do it shortly. If you have any issues during today's live strain, please contact Lumi on (02) 8075 0100 or contact Magellan on (02) 9235 4888. You can also find those contact details in the announcement that was lodged on Wednesday morning with the ASX. I would now like to introduce our directors, Robert Fraser, David George, John Eales, Colette Garnsey, Karen Phin and our Company Secretary, Marcia Venegas. A brief biography of each appears in the company's annual report. We also welcome Clare Sporle, a partner from the company's external auditors, EY, and representatives of our share registry Boardroom Pty Limited. The minutes of the previous Annual General Meeting held on the 21st of October 2021 have been approved by the Board and signed by the Chairman. These minutes are tabled and are available for inspection by any shareholder wishing to see them by contacting the company. The Notice of Annual General Meeting has been made available to our shareholders. I will take the notice of meeting as read. I'll now take a moment to outline this morning's agenda. We have a lot of 2 hours for today's meeting and will conclude at approximately 1:30 p.m. I will shortly make some opening remarks before handing over to David George, our Chief Executive Officer and Managing Director for his presentation. Following this, we'll consider the formal items of the business, which are the receipt of the company's financial statements and reports; the adoption of the remuneration report; and the reelection of myself as a director. If there are any questions from shareholders or proxy holders during the AGM, we'll be happy to address them. Questions will be addressed immediately after the presentation. The questions relating to items of business will be addressed once we reach the relevant resolution. On the screen the formal disclaimer regarding any forward-looking statements that any of the directors will make today. All comments are subject to the formal disclaimer shown on the screen. In order to provide you with enough time to vote, I now declare voting open on all items of business. Before we begin today's presentations, I will now provide an overview of how to ask questions and how to vote. I'll begin with instructions for our online attendees and then turn to the attendees here in person. For our online attendees to submit a written question, select the messaging tab at the top of the Lumi platform. type your question in the box towards the top of the page and press the arrow symbol to send. A copy of your submitted questions can be viewed by selecting my messages. We ask that you only submit one question at a time to allow other shareholders the opportunity to ask questions. When asking questions, please include who you are representing. And if your question relates to a specific resolution, please include the number of relevant resolution at the beginning of your question. Your questions will be sent immediately by -- for review by our moderator. Please note that I will read out your name and where appropriate state who you are representing before reading out your question or comment. Please note that whilst you can submit questions from now on, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on one topic, amalgamated together. There is also the ability for shareholders to ask questions verbally through the Lumi platform. To do so, please by the instructions within the portal. Finally, due to time constraints, we may run out of time to answer all of your questions. Moving to instructions on how to vote. If you're eligible to vote at the meeting, a new voting tab should now be visible on your screen. Selecting this tab will bring up a list of resolutions and present you with voting options. Shareholders who wish to vote for the resolution, please mark the, for box. Shareholders who wish to vote against the resolution, please mark the, against box. Shareholders who wish to abstain from voting on the resolution should mark the, abstain box. Abstentions will not be counted in computing the required majority for the poll. Your vote is automatically recorded, there is no need for you to press the submit or enter button. You do, however, have the ability to change your vote up until the time voting is declared closed. Now we'll provide instructions for our shareholders attending in person. To ask a question, please raise your blue card, and we will call upon you to ask a question. Once called upon, a Magellan representative will come over to you with a microphone. Please do not ask your question until you have received the microphone. We request that you ask only one question at a time to allow other shareholders the opportunity to ask their questions. Please also state your name and where appropriate state who you're representing before your question. Upon registration, shareholders attending in person were given an electronic handset. So in room attendees, today's resolutions will be displayed on the screen of your handset. Select the item you wish to vote on using the scroll wheel and then the green [ square ] select the item. Your selected item will appear on the screen, press the green square to bring up the voting options. Press 1 to vote for the item, 2 for against, or 3 to abstain. Abstentions will not be counted in the computing as required for a majority poll. Use the green square to move on to the next item, we'll press the red triangle to return to the full list of items. If you have any issues using your electronic handset, please raise your blue card, and a member of the support team will come over to assist you. I remind proxy holders that you must comply with the direction of the shareholder if you wish to launch a valid vote. If you've already submitted a proxy vote, your existing vote will be canceled if you vote again today. I appoint Steve Hodkin from Boardroom as a returning officer. The returning officer will arrange the counting of the votes in accordance with the voting exclusions as set out on the notice of meeting. Following the poll, the meeting will be closed and the votes tallied. Results of those polls will be released to the ASX later today. That will also be made available on Magellan's website. So turning now to the Chairman's address. As you know, I was appointed independent non-executive Chairman of the Board in February 2022. So this is my first address to you in this capacity. It is fair to say that 2022 has been an unprecedented year for Magellan. I acknowledge that this year's events were not what you would have expected and have created challenges that have been felt by all of our stakeholders, from our clients, to our staff and shareholders. Throughout this period, the Board has been extremely focused on restoring stability, confidence and value to Magellan's clients and shareholders. This has included embarking on a program on an extensive shareholder engagement program, meeting with a broad range of clients and shareholders, both domestically and internationally and holding 25 Board meetings during 2022 financial year as well as 10 Audit and Risk Committee meetings and 6 Remuneration Nomination Committee meetings. Through this process, our focus has been on: enhancing governance and accountability across the business; restoring the strong performance track record of our core Funds Management business; engaging with our clients and investors; retaining and motivating our team; and implementing capital management initiatives to create shareholder value. First and foremost, our priority has been to ensure that we have the right leadership team to steer Magellan through the next chapter as it transitions away from being a founder-led business. In May 2022, we announced our appointment of David George as Magellan's CEO, Managing Director, following an extensive search. David commenced in his role on the 19th of July 2022 and brings an outstanding investment management pedigree, strong client service credentials and a fresh perspective to our team, having spent the last 14 years with the Future Fund. He is an excellent fit for our business and has hit the ground running, working effectively with all parts of the organization in these early months. We've also created a new Chief Operating Officer role, which has been filled by Kirsten Morton. Kirsten will undertake this role in conjunction with her role as Chief Financial Officer. The function of the COO role is to support the CEO, streamline processes, enhance efficiencies throughout the business and ensure best practice initiatives are rolled out across the organization. Within our investment team, earlier this week, we formalized David George's role leading our investment function through his appointment as Chief Investment Officer. David assumed direct responsibility from Magellan's investment functions when it commenced in July and has been working closely with the investment team, applying his extensive experience to build on the efficiency and excellence of our investment activities. It is important to note that David's role as CIO is not as a portfolio manager, but rather is focused on thinking broadly about the world and our clients and where they're heading and shaping our investment capability to address this. David will work closely together with Gerald Stack, who has been appointed to the role of Deputy Chief Investment Officer in addition to his responsibilities as Head of Magellan's successful globally listed infrastructure business. Gerald has held previous leadership roles within the investment team since he joined Magellan in 2007. These appointments have enabled Chris MacKay to step back from his oversight role of Magellan's Global Equities strategy, which is led by Arvid Streimann and Nikki Thomas. Earlier this year, at the request of the Board, Chris returned to Magellan to provide immediate support to the investment team during a period of transition for the business. The appointments of David George and Gerald Stack to the role of CIO and Deputy CIO mark the conclusion of this transition, and I personally like to take this opportunity to thank Chris for his outstanding contribution to Magellan this year. Earlier this month, Hamish Douglass commenced a new role within the business as an external consultant to Magellan’s investment team. This consulting role includes providing investment insights, particularly on macroeconomic and geopolitical issues to the global equities team with some limited institutional client engagement. David will oversee this engagement and sure that it supports investment and client outcomes and continues to benefit Magellan. In addition to building out our leadership team, we've also been focused on ensuring that we retain, engage and motivate our people. Our staff are fundamental to delivering value for our clients and generating shareholder returns. So it is imperative that we look after them. In March 2022, we announced a number of employee initiatives, including: one, a retention bonus plan to be paid to staff in installments in September 2024 and September 2025; two, amendments to the terms of our employee share purchase plan, which extend the life of the loans and remove the requirement to direct a portion of an employee's annual bonus towards the repayment of their SPP loan; and three, lastly, we announced the issue of up to 10 million options to employees on terms equivalent to the bonus options issued to shareholders in April of this year. These options vest and become exercisable on the 1st of September 2024 and expire on the 16th of April 2027. That will not be quoted on the ASX and are not transferable. All of these initiatives are subject to standard conditions around vesting and continued employment and have been structured to ensure align with the interest of shareholders with a focus on long-term value creation. Importantly, they have allowed our employees to remain focused on our clients and the business during a period of change and uncertainty and assisted in achieving our overall goal to be an employer of choice for our people whilst balancing the needs of our shareholders. Another area of focus for the Board in FY '22 was the -- was enhancing shareholder value through capital management initiatives. At the interim results in February, we reiterated our focus on Magellan's core Funds Management business. As a result, we announced that we would not make further investments in Magellan Capital Partners and sold our shareholding in GYG for cash consideration of $140 million. The sale, which completed on the 24th of June 2022, was an excellent result for shareholders, delivering a 36% premium to our entry price in January 2021, 18 months earlier. We also confirmed our dividend payout policy of 90% to 95% of net profit after tax from our Funds Management business and paid a total dividend for the 2022 year of $1.79. The first half dividend of $1.101 was franked at 75%, and the second half dividend of $0.689 was franked at 80%, representing 77% franking on a weighted average basis. As noted at our full year results in August, with the offshore banking unit regime coming to an end from the 1st of July 2023, shareholders can expect that our franking levels will increase in the following years. Another capital management initiative that we implemented throughout the year was the suspension of the dividend reinvestment plan and the implementation of an on-market buyback of up to 10 million shares. The buyback remains on foot and we have bought back 2.2 million shares today. We're taking a measured and disciplined approach to buying back shares and considered this an effective and value-enhancing way to return capital to shareholders. Last but not least, in April, we issued bonus options to shareholders on a 1-for-8 basis for nil consideration. These options are quoted on the ASX that expire in April 2027. Looking forward, the Board recognizes the need for continued strong governance and clear communication around the company's strategy, and we are making good progress in this regard. Notably, this year, we've embarked upon a Board review and renewal program with the aim of enhancing governance and ensuring we have the right skill mix expertise, independence and diversity to support Magellan’s future strategic direction, whilst balancing the need for continuity and retention of corporate knowledge. We are targeting a Board of seven directors, comprising six independent non-executive directors and the CEO and Managing Director. The first step in this process was my appointment as independent Non-Executive Chairman of Magellan Financial Group in February 2022 and the appointment of Robert Fraser, as Deputy Chairman. Robert also continues as independent Non-Executive Chairman of Magellan Asset Management, Magellan's core operating subsidiary. David George will also join the Board as Managing Director when he commenced as CEO and Managing Director in July 2022. Today, we announced the appointment of a new independent Non-Executive Director of the Board of our main operating subsidiary, Magellan Asset Management. We're delighted that David Dixon will be joining the Board of Magellan Asset Management with effect from the 1st of November 2022 as a Non-Executive Director in Deputy Chairman. David has over 30 years' experience leading and growing investment businesses within the funds management industry and extensive experience as a senior leader and the director of trustee companies and superannuation funds. His deep experience will be invaluable to Magellan, and we look forward to his contribution. Our intention is that David will also be appointed to the Board of Magellan Financial Group limited in due course. As previously announced in the market, today, we farewell Independent Non-Executive Director, Karen Phin, from the Board, who will retire with effect from the conclusion of today's AGM. Karen has provided invaluable advice to Magellan over the past 8 years and brought a wealth of financial services and capital markets expertise to the Board. Karen also played an important role in our regulatory engagements and fostering innovation throughout the years, notably where we launched our first Active ETF. I'd like to take this opportunity to thank Karen for a contribution to the Board over many years. We wish her all the very best in the future. Thank you again, Karen. In addition to Karen's retirement, we anticipate that there will be further Board renewal over the next 6 to 12 months. And as a result, we'll be seeking to appoint additional independent non-executive directors. These are in addition to David Dixon. These appointments will deliver our target Board structure of six non-executive directors and one executive director. The Board search for these additional nonexecutive directors is well underway and with our focus being on ensuring Board diversity and the requisite skill set mix required to support Magellan’s future strategy. Before I pass over to David, I'd like to conclude by saying that despite the recent challenges, Magellan remains a fund manager of considerable underlying financial strength and great potential. Only a few months into his new role, David has already begun working effectively with all parts of the organization and the Board is confident that he will be an excellent leader for the next chapter of Magellan's growth. Our employees are genuinely committed to restoring shareholder value with over 85% of our staff are Magellan shareholders, aligning them to the interest of our other shareholders. Whilst we recognize that our global equity strategy has underperformed relative to the market over the past 2 years, I can assure you that we have been and continue to take proactive steps to address this and to restore the strong investment performance for which we've been known over the past 16 years. The outperformance of the Global Equities Strategy relative to the market during the last 6 months of the transition has been pleasing, particularly given market conditions. We remain committed to our investment philosophies and disciplined investment approach, which aim to generate wealth over the long term whilst reducing the risk of a permanent capital loss. David will soon take you through his thoughts on the business and the future. He has the full support of the Board, and we are aligned in our focus on returning Magellan to growth. On that note, I'll pass to David who will provide an update on strategy. Thanks.

Thank you, Hamish, and thank you all for attending today the meeting. So I have now been at Magellan for 3 months. And today, I'd like to take you through, and provide shareholders an update on my thoughts and observations of Magellan over this period and how I see the business developing in the coming years. I'd like to start by briefly discussing the changes announced earlier this week with respect to the leadership of the investment team. So this involves formalizing my role within the team as Chief Investment Officer and the appointment of Gerald Stack as Deputy CIO. This is part of the process of evolution and best positions the organization to deliver investment performance to clients, particularly in the global equity strategy where performance has wavered. The appointments of myself and Gerald to the roles of CIO and Deputy CIO has enabled Chris MacKay to step back from his oversight role. So I'd also like to personally thank Chris for supporting me and guiding the investment team during the transition period and working closely with the portfolio managers during this time. His involvement was additive to both the team and portfolio, and he continues to be available as an important part of the Magellan family. To my role as CIO is not as a portfolio manager, but rather, I'm there to think more broadly about where the world and our clients are going and toward -- and to shape the investment capability to address this. I'll aim to ensure effective accountable and well-organized processes, drive excellence in portfolio construction and risk management and empower our team of portfolio managers and research analysts by providing them with the right resourcing and tools and removing every distraction possible so they can give maximum performance -- maximum focus for performance. Gerald, as Deputy CIO, will be focused on getting the team to work more efficiently, collaborate more and generate investment ideas faster and wider than previously. These changes have been communicated to our clients, and we will continue engaging with them as well as other key stakeholders such as the research houses, to address their questions in the coming weeks. Having sat on the client side of the table for many years, I know that when outcomes haven't been up to standard, change is something that clients expect. They want it to be deliberate and designed to address performance, and that's what these changes are. They will improve collaboration and information flow, which I believe will in time show through inconsistent performance. So before I start my presentation, I'd like to talk to Magellan more broadly. So in my short time here, I can say with conviction that despite the travails of the last year, Magellan has quality attributes, outstanding people and strong foundations to support the future growth plan we plan to deliver. I'm bullish active management. The next 10 years will not be like the last. So inflation exists again, and its persistence means that central banks are no longer in sync, and this is creating cycles. So monetary policy cycles are back. Further, the long cycle of deglobalization -- of globalization is showing signs of reversal and moving to deglobalization. And the calm environment for geopolitics would seem to be shifting to one of competition, and in some cases, conflict. So this is not an environment where a rising tide will lift all boats. Uncertainty drives opportunity for active managers. It impacts company costs and profitability, and it will drive dispersion. And it is in this environment where thoughtful, long term and deeply researched investing will be rewarded. So on to the foundations. The core asset of any investment management business is its people. And Magellan has long tenured and high-quality staff. The majority are aligned as shareholder owners and have immense pride in what they do and care for their clients. Magellan's research capability is driven by experienced investment staff. We focus on deeply researching and understanding the companies we invest in and the macro context in which they operate. With this long-term focus, we stretch our gaze beyond the horizon of most investors. The research strength is the foundational building block of the portfolio construction process, which is executed within a disciplined framework and with careful risk management, turning great companies into portfolios that outperform. Magellan has over the years invested heavily and wisely in both the operational support and product innovation. Collectively, these teams deliver excellence in risk, operations, compliance, legal and product management that allows our investment teams to focus on portfolio management and performance. These teams, together with distribution and marketing are the backbone of Magellan's success. Our distribution and marketing team is market-leading and well known. There would be a few advisers or clients in the retail investment sector in Australia, with whom the team hasn't spoken or had coffee with and it is these personal relationships that the team foster and nurture that grew Magellan to over $100 billion in funds under management, along with the institutional team, both here and in the U.S.A. And I believe they can do it again. Magellan continues to have significant scale across its 3 primary strategies. But performance in our Global Equities strategy in the last 2 years has not been to our normal high standard. This is where I'm taking action. We will leverage Gerald Stack's ability to manage and develop great investors, we are excited to bring his skill set to the Global Equities analyst team with a view to optimizing analyst engagement but also the engagement between analysts and portfolio managers. When we get this right, the team dynamic where we get much more as a collaborative group than we do as individuals, can emerge. I'm a great believer in the qualities of teams, exchanging ideas and building on each other's experience to achieve excellence. On the portfolio side, I've been very pleased with what I see in terms of process and in particular, the decision-making and outcomes in the last 6 months under the management of Nikki Thomas and Arvid Streimann. Across our range of global equities strategies, I'm consolidating portfolio management responsibilities in the hands of the portfolio managers I see as having the right mix of experience and skills such as in sustainability and ESG. And these are Arvid, and Nikki, as well as Dom Giuliano, Alan Pullen and Elisa Di Marco. As CIO, I will support this team by putting in place the right data and tools that produce the feedback necessary for continuous improvement. The infrastructure strategy headed by Gerald is in great shape. And as I've mentioned, he's built an outstanding investment capability. This team already shares portfolio management duties with Gerald, and this does not change, and the strength of this group allows Gerald to broaden his responsibilities as Deputy CIO. The strategy itself remains one of the best of its kind globally, with their domain expertise setting the stage to grow. The Airlie Australian equities business joined Magellan 5 years ago. Airlie is a team in business going from strength to strength, continuing to deliver investment returns in a variety of environments. It's also a success story of integration, where the strong business established by John Sevior, built up by he and Matt Williams and now with Emma Fisher arising as a portfolio manager as well, has found a home at Magellan. This has been a home where their investment team and approach is thrived while benefiting from the operational support capabilities of Magellan as well as distribution outlets to new client segments, such as retail launch of the Airlie Australian Retail Fund. Our distribution and marketing capability is the conduit for us to connect with our clients. And it is not just for sales and service, but these partnerships and relationships are what drive our thinking as to how best to evolve to meet their needs. This is a core capability and at the heart of Magellan. The 35 member team, which includes our distribution business Frontier in the United States, collectively nurture relationships with over 80 institutional clients globally, 9,000 advisers in the local retail space and have over 0.5 million direct and indirect investors. Funds growth is underpinned by this team, and we will resource and grow it as required over time. The organization that Frank Casarotti has cultivated and grown from the early days of Magellan is strong and deep, and there are several people that have been with him since the start. I'm more than confident that when the time eventually comes for Frank to retire that the robust succession plan he's put in place will make this seamless transition. From our 3 primary investment capabilities, there are several opportunities for near-term growth. The Core Series format, which began with the core infrastructure process developed many years ago has huge potential. Each version of the Core Series represents the broadest exposure to the Magellan research engine. Companies that make our quality definition, sustainable earnings moats, great management teams and that meet the bar set by our deep fundamental work. This forward-looking research lens is differentiated, is of high quality, and is worth a premium of our systematic indices. With clear space and marketing focus, I believe clients will see the value in this approach and this will be a scalable growth area. The energy transition, which is the process of shifting the world's economy to dramatically lower carbon intensity. It's a multi-decade cycle with enormous capital requirements, huge disruption potential and importantly, significant opportunity. Magellan has years of investment research in infrastructure and sustainability as applied to energy, climate risk and disruption. This is an ideal platform on which to expand our capability to invest in companies that will benefit from the transformational growth opportunities arising from the energy transition and have the capacity to deliver tangible environmental impact. This strategy through investing in companies that exhibit exceptional quality characteristics will support our clients to invest for positive impact and meet their various commitments to invest in a sustainable manner. Small cap equities in Australia is an area where high-quality managers can generate consistent outperformance and are in demand. The Airlie team has some pedigree in this area and certainly in the Australian market. Smaller companies are already available and invested in by Airlie, and so expanding in this area has great synergy for us. And finally, Magellan will grow beyond our 3 core capabilities. We will be looking for opportunities to invest in experienced, quality teams, and capabilities in equity, and we believe we can replicate the integration success of Airlie. As time moves forward, and we are again delivering client outcomes through performance, we will look towards areas like private markets as allocation to this segment is growing in our clients' portfolios. And where we can see it makes sense, we will grow alongside their needs. We will be disciplined in our approach to this. Any investment or acquisition we make in time will be strategic and scalable and will fit alongside our existing Funds Management business and deliver synergies in order to create shareholder value. As well as focusing in areas consistent with our client portfolio needs, we will importantly focus on our capacity to deliver value proposition to those teams and to our clients and thus creating value for shareholders. Through growth in our existing strategies and new products, I believe we will be a fund manager of global scale once more with over $100 billion in funds under management after 5 years. This will not be growth for the sake of growth. It will be considered growth driven by creating long-term shareholder value. We have a strong balance sheet and capacity to execute this while continuing with the on-market buyback program and to pay dividends. This growth will also be more diversified. As we expand our range of capabilities, we will be less dependent on our Global Equities business. I will look to leading indicators and market trends and will take signal from our clients as to how we do this, positioning Magellan in areas that will be growing allocations in client portfolios and are supported by industry tailwinds. We will invest in our relationships and maintain our position as a partner of choice in the Australian wealth industry, maintaining and growing the well of commitment and support from our adviser partners. We will invest in ensuring that we can bring more of our diverse offerings to global institutions and create value-added partnerships that sustain in a competitive environment. This strategy and a continued focus on how we deliver performance in every area will be the ultimate driver of attractive returns for our shareholders. So that is what Magellan will look like in 5 years, but I'm sure you'll be interested in our more immediate priorities in fiscal 2023. To facilitate growth and diversification over time, we will expand our distribution team, particularly in Europe and the U.S., and deepen the specialist product capability to support a wider range of product. We are reaffirming our Funds Management business cost guidance for fiscal 2023, and we are driving for efficiency in the business and activity this year will be done within the existing platform and team. Part of near-term growth will come from the redirected efforts towards the Core Series and the launch of the energy transition strategy. We will also embed our outstanding capability within ESG, which we've developed and refined over our 15-year history across all client solutions and the organization. My key focus as CIO is to improve performance. As I mentioned at the beginning, our people are our most valued asset. We are a people business, and I want a culture that drives high performance and career development. To get this right, I need to directly align employees with the outcomes of both clients and shareholders. This will include a long-term incentive plan that aligns them to the strategic objectives of the business that I've outlined today. I want teams that think long term and are committed to Magellan now and Magellan in 5 years. This also includes a focus on employees' experience through revisiting our values and culture. It is together as a team that we will succeed in driving Magellan forward and growing again. So in closing, I want to assure you that my focus is on fixing performance and positioning Magellan to grow. Thank you. And I'll now hand back to Hamish. I look forward to interacting with you in the Q&A.

Thank you, David. We'll now move to answering shareholder questions.

Questions relating to items of business will be addressed once we reach the relevant resolution. As a reminder, for online participants, you may submit written questions through the messaging tab or you may ask an audio question by pressing request to speak. For our in-person attendees to ask a question, please raise your blue card, and we will call upon you to ask questions. Please submit your questions now in the meantime. We received many questions in advance of the meeting from shareholders, which I will endeavor to answer now, where we have multiple questions on the same topic, we have amalgamated base. Craig, did you want to read out the questions?

First question is to begin, we have received a number of questions from shareholders regarding the share price and what we are doing to return it to previous levels. And that's for you to address.

Yes. No, quite simply. So David has a good plan. And look, I'll say up front, too, we share your pain, and we're very upset by what's happened with the share price over the last 8 months or so. If we execute against David's plan, we'll see the business return to growth. And I think the share price will respond accordingly. Now obviously, we can't give forward projections at all, but we believe that David's plan that you've got a flavor for will deliver, as I said, the company to grow. And if we do that, and we move the business forward, then the share price will react accordingly. Next question?

The next question is what lessons have you learned from the events of the last 12 months?

Yes. Look, it's very difficult. Again, look, I'd say upfront. In terms of just overall lessons, I mean, I think the strong balance sheet that Magellan shows that when you go through what we've been through, that gives you out of security and safety. I think we've accelerated our plans around governance and strengthening the board where we see necessary. We've got a very good CEO. And I think having David come on board has been a breath of fresh air, and we've got new blood and fresh eyes to looking at the business. I think there's no doubt that Hamish was a larger than life and very big personality within the business, who was tied very much to many of our big institutional clients. And there has been some criticism around managing that key man risk. And what I would say is that we were in constant conversation with Hamish about how we would recalibrate his role within the business. But it was very difficult. There are a lot of large institutional clients who bought Magellan because they -- and they didn't want to deal with anyone else. And so in managing that key man risk, I think we've got a more independent Board now. And this is a transition that we've had to make from being a founder-led business to one that is sort of moving into a different phase of its life. But I hope that suffice us with that question. Craig, the next one.

Next question is where is the company going in the future?

Do you want to take that?

So I've just outlined my strategy and sort of the vision I see over the next 5 years. And I think the company needs to grow. I think all of these kinds of businesses are a little bit healthier when they are growing. And so that is an internal statement around career opportunity and growth. But again, as a platform, it's in fantastic shape. We need to get a few things right, but there's lots of potential for us to bring new capabilities on but also develop from internal, the capabilities into both better performance but some additional strategies that we think will have great appeal to clients.

Thank you.

The next question, Mr. Chairman. We've had a number of questions from shareholders relating to Hamish Douglass' consulting agreement. I think you've touched upon a couple of those in a formal response. Question five is how robust is the setup for Hamish Douglass is going to be.

John, can you take that?

Yes. Thanks for the question, Craig. I think the setup for Hamish will be very robust and we've created a situation where he is able to provide his insight into the investment process and the macroeconomic environment to the investment team within the business. And we consider that a very useful addition to our business and the practices within Magellan.

Next question. We've received a number of questions on capital management. The first one, which is why is the on-market buyback not proceeding faster.

Rob?

Thanks, Hamish. I'll address that. I'm sorry, I'm not standing to address you, but it's a bit ramp-up here. Just by way of update, the buyback has been progressing smoothly. To date, we've purchased approximately 2.2 million shares out of the 10 million in total that we had originally announced. We are taking a very disciplined approach to when we buy those shares, if and when we buy them, particularly given the current market conditions. The other thing I'd say in terms of timing is there are obvious sensitivities given the nature of the announcements that Magellan has made over the last 6 months as to when we can buy shares on market. It's already a decision to purchase it needs to take into account those constraints. The current buyback extends through until April 2023. So the Board believes there will still be sufficient time to continue to purchase shares under the buyback program.

Thank you.

The next presubmitted question we have relates to FUM and flows, fund flows and asked what strategies are you implementing to reduce outflows? And how are you going to attain inflows.

David?

So I think a couple of the key strategies are some things that I've addressed already in my discussion and earlier in the week in our announcements. But ultimately, those are some adjustments in particular to how the team works internally. It's, in my view, fund and flows follow performance. We have a very good investment philosophy, and I think the process is intact largely. And I think there's a few adjustments we can make in terms of getting the most out of a team. For me, getting the most out of a team is having leadership, building some accountability and having outstanding communication. And I believe between myself and Gerald, we have some strategies that will get the most over that group, and I think that leads to performance over time.

The next question is with a significant reduction in FUM, will that result in a reduction in the number of employees.

David?

So we don't -- I think there's no link necessarily between FUM and employees. This is a very profitable business, and it can invest where it needs to. And I would hold very strongly to the principle that we will not cut corners, and we will not cut costs in ways that impact our ability or the likelihood of us delivering performance or in any other way, compromising the way we service or invest in operations for the benefit of our clients. So when we make changes, and we have made some, it's always been with a view to keeping the business as simple as possible and ensuring that we have the right organizational alignment to the key success factors that will bring us forward. Those are investing, those are servicing our clients, and having outstanding operations to support that. So we won't compromise on that.

Thank you.

The next question is at what level of FUM does the operation become marginal?

David?

That is not something we tend to manage towards because we are a very, very long way from there. So I think some of what I've just said is applicable there. We've got plenty of space actually to invest for growth. We've got plenty of space to pay dividends. And as my fellow Director, Mr. Fraser just discussed, we also have space to continue with our own market -- [indiscernible], we're quite a long way from marginal.

The next question relates to the bonus option issue to both shareholders and employees. The shareholder asks, is the exercise price on the employee options and shareholder bonus issue overly optimistic and therefore, ineffective.

Rob?

I'll take that one again. Look, I would say that in terms of options and in terms of financial markets, 5 years is a very long time. I think the last year that we've just been through demonstrates that the options were issued barely 6 months ago. So 90% of the option exercise period is still in front of us. So we're simply not going to speculate on what those options may or may not do. But certainly, our sincere hope is that by focusing on our core Funds Management business, focusing on our clients' needs and improving performance, that's going to deliver the best possibility that we've got of getting those options into the money and exercised.

The next question relates to the Magellan Global Fund Closed Class units. The shareholder asks what is Magellan doing about MGF and its persistence trading at a discount to its net asset value. Will Magellan be communicating with clients on this.

David?

Thank you for that question. So in my time here, I've certainly received and I'm hearing the feedback with some disappointment around the discount in the global fund closed class. I think there is no question that we can communicate more and better with unitholders. That is something we have in train, and you will see as unitholders more communication around what we are doing in that regard and what we can do in that regard. One of the things that we are doing is that the fund is buying back units actively. And through time has already deployed AUD 340 million along that line. But ultimately, the key element, again, to come back to performance is if that fund is performing, it will be very good value at a discount because that discount should -- is a function of supply and demand and better performance should create more demand...

The next question is on ESG. The shareholder asks what measures are Magellan taking to protect itself and shareholders against the impact of climate change and what more can it be doing.

David?

Thanks, Hamish. The -- so at a corporate level and as a fund manager, we have a fairly low carbon footprint, but we are focused on being as efficient as possible in every way we can around reducing that further. And we've also committed to reporting and being as transparent as possible as shareholders require. I think we can make, I think the larger impact is on the investment front in terms of governance and ownership of the funds that we manage on behalf of clients. And in that regard, we've developed significant expertise over a number of years. We've also become signatories to things like the Net Zero Asset Managers initiative and other areas where we are working both ourselves within our investment process to evaluate risks and manage those but also as collective groups within the industry.

The next question is why did Brett leave.

Look, it was a personal issue that Brett had, the company signed a confidential agreement with him, and I can't say any more than that.

The next question is on fees. The question is, are you going to reduce management fees.

David?

So we have no plans to reduce investment management fees. I may sound repetitive at this point. But ultimately, we are investing our time and energy in the effort to deliver investment performance. And when we are doing that and when we are doing it in ways that we have done in the past, and I believe will in the future, our clients tend to see value in what we're doing on a net of fee basis. And when we have those discussions when we are performing, fees tend to be much lower down the list, and I think we'll get there again.

And this is the final preprepared or presubmitted question, Mr. Chairman. This is a question for you. Is Hamish McLennan able to commit time to the role, given he is Chairman of 3 companies and Director of 2 other companies.

The answer is yes. I work because I want to work. I accepted the role of Chairman because I have the capacity and the time to deliver against the task at hand. I would say upfront, too, that under the circumstances as they were very abrupt and it all happened over a weekend in February. And I applaud the Board for what they've done in terms of the additional commitment they've given to the company. I have a range of experience across a number of different companies. And as I said before, the Board asked me to do the role. And I felt I didn't want to be a director, and I'll pick, all of my fellow directors, which share the same set of feelings that you've got to stick in dealing when the going gets half. And so it was a very difficult -- a series of circumstances that we had to deal with. And we jumped in because we had to do it and do it on behalf of all the staff and shareholders. So I do appreciate that it's all been difficult for you as it has been for us. But we're there to honor our commitments and do the right thing. So yes, I do have the time and I'll apply the right amount of time to working in Magellan. Okay. We might just move to the in making questions. Are there any questions from any shareholders here. We'll get you a microphone.

Good morning, Mr. Chairman. I'm Elizabeth [indiscernible] from the Australian Shareholders Association. I represent 133 holders and hold 165,000 open both this afternoon. I did want to ask you, having lost the CEO and Chief Investment Officer in 1 year, does the Chairman consider his time to have a complete refresh of the Board of Directors? And is there a robust succession plan in place.

Thank you for the question. It's a great question to ask. We, in a very measured fashion going through a Board renewal program. So we've already announced that David Dixon will join the Board. Karen has done a fantastic job, I would say, over the long term, 8 years at Magellan. And what we were principally dealing with was a human and personal issue with the Executive Chairman has stepped down from medical related absence, and he was the co-founder of the business. And in my 30 years of working in business, I've never encountered a situation like that. The Board believe that Hamish Douglass would continue for the long term in the company. So what has happened has happened. And I think that the Board has been very diligent at not only discussing succession planning over many years actually. This is not a subject that just sort of suddenly raise its head in February. We have been talking about it for many years. Notwithstanding that, but it's not meant to sound like an excuse, but we've dealt with the Hamish Douglass issue. We have been consulting the company. We think that David is a fantastic hire. I think the Board lent in very much in terms of ensuring that we selected the right person and we had a rigorous process around looking at a range of candidates. And we felt in this country, there was no better person than David. Just in terms of Board succession, we had discussed if there was ever an issue like this, but I would step up, Rob would move from -- moving to the Deputy Chair role and that we thankfully were able to get Chris MacKay back. So it was very dramatic and there's no denying that. And we're quite upset in terms of what's happened to the share price. But we're all here to try and restore shareholder value for all of our shareholders. So I think we've got a very clear perspective on what the company made moving forward. The very fact that I'm an independent chair. We don't have a founder and as an Executive Chair is a massive move in terms of governance. And there is a lot of institutional knowledge on the Board. So what we want to do is just make sure that as we bring new people on to the Board, we have the right sort of handover and we do it in a very considered fashion.

Thank you. Any other questions? Thank you.

My name is Laura Hall, and I'm a private investor. Pleased to see David taking back home. I'm still a little bit concerned about performance and ongoing performance that you've put in charge. The infrastructure fund hasn't exactly been doing wonderful things the last couple of years. It's underperforming, it's benchmark as well. And the longer-term performance is heading back down to where the benchmark is. So I don't know why I invest in a fund like that when I can get it from anywhere else. Similarly, the Core Series, it's -- as I understand it, quite a lot of mechanical processes in that. And so what's going to change there that's going to make anybody want to invest in it?

David?

So thank you for the question. And I understand your concerns when looking at shorter-term performance. So I think I've outlined some of the steps that I'm taking, but performance takes time to turn around. And -- but I'm confident that we have put in place some changes that will support that process of it turning around. I think -- I suppose I look back at this, and there's 2 sorts of -- there's 2 schools of thoughts on change. Clearly, making changes to the investment process is something we should do very carefully. We've had some change in terms of Magellan and those investment, particularly some of the personnel, which are well known. But ultimately, I've had some time to review. And I think that we are making some changes that will support future performance that we are making now. So that is one. And now there are deliberate changes rather than changes that happened to us. So if we have our research engine, and that's what feeds core. It's the core, is the diversified exposure to all of the research capability that we have. There are some processes in there, but that's ultimately just to curate that research into a smaller but very diverse and systematically built expression of that research engine. I'm convinced to that, that actually is a value-added approach relative to anything else that you can buy after shelf. But ultimately, when we add active management, I think Magellan will be producing good performance over time. So I hope you'll stick around.

My name is Jorn Katteland and I've got investments through a UI company as well as the super fund. I want to know with the funds -- if funds under management now dropping to $50 million or $50 billion, why should -- when is that going to turn around? Or what do you see or how long is that going to take for you see that the results coming from the various funds will turn that around? Do you see that dropping maybe another $10 billion? Or what do you forecast and towards over the next year? Or in other words, what's the bottom line or the bottom level that you think it could dropped to because at the moment, it's just like dropping every couple of months. I see it's down another $5 billion or $10 billion. So that's quite a concern as a shareholder of the shares.

David?

Thank you for the question. So there's 2 main things that impact the level of funds under management, certainly where markets go. So that's 1 factor and markets have been down more than up in the more recent past and client activity. And so it's very hard for me to speculate either where markets will ultimately go or where client activity will go. But I think there are 2 fundamental drivers, client activity. One is what are the outcomes we're delivering. And if we deliver good outcomes, often with a lag, that should impact performance or that should impact where clients allocate funds. And the other is making sure we are providing the right amount of service, the right amount of transparency so people understand where performance is coming from. And I think we do that very well. So it's very hard for me to speculate where funds will go and how each client will make their individual decisions. Sometimes those decisions aren't even necessarily related to their view on Magellan or our specific performance in the cases of actually the last couple of months, there's been a few instances where market events and volatility have caused our clients to want to rebalance or need to make changes to their portfolio that have impacted our funds as well. So there's a number of factors. But I think if we continue to do one thing we can control, which is to communicate very well, be transparent and show -- explain to people how we are managing their funds and what we are planning to do to make sure we're doing that best and then deliver. That's what turns the corner on funds under management.

The move we have seen which a couple of months the stream market is more strong. We talked about Brazil for tough a couple years. So yes, you got big pipes and checkout on talking to people that have clients, so it isn't likely would it over the next 6 months to a year, but continue leveling off going down. Do you -- where do you see now internal account stable.

So I think it's very hard to speculate particularly in the near term as to, again, the aggregation of client decisions. So what I would say about markets is I don't expect healthy, friendly markets going up where in that manner in which the rising tide will lift all boats. So that's not the market environment I think we're going to face over the next 5 to 10 years. I think there's going to be a bit more volatility and a bit more uncertainty. The positive in that is that I expect that's a more friendly environment than the one we've had in the last 10 years for managers that are making active decisions and doing very high-quality research on the positions we take in companies. So I think that should be a more friendly environment for the value-add proposition that Magellan can have, even if the market isn't creating higher funds under management.

Mr. Chairman, Mark Tinsman. I'm a shareholder. Just on the funds under management. I was just wondering if you could give us some guidance on how many of the mandates you have institutional mandates at what you've called term? How many are on demand and how many at the moment are under active review?

So I won't know the answer to that, I'm afraid. In terms of how most institutional mandates work is that they largely are on demand. So they're very infrequently contracted or very long term or have long notice periods. So institutions generally can make decisions when they see fit. And then move funds when they choose. So that's simply how the industry is. But in terms of how many would be under review? Again, that's a matter -- we're communicating constantly with our clients, but they wouldn't necessarily share that information with us.

Not at the moment reviewing...

I wouldn't say none, have said that. Again, it's a normal part of the discussion when you -- and it's a very normal part of most institutions process to do annual reviews or periodic reviews. So we're always under review in many ways. But as we've been discussing, when we haven't delivered performance up to what the standard we would want to in the last couple of years, it's more likely that we'll be reviewed.

Okay. Any other questions?

[ Knowing Brownfield ]. I'm just an investor. Curious question, a judge on the pre success was predicated upon Hamish Douglass' personal appeal to institutional investors as his strategy in what he invested in because I only ask because if he is not there. I know he has some contract arrangement with the Board, but he's not there as CEO of the company. What are we to expect the same outstanding share price as we have had for the last 5, 6 years? Or are we just talking about a new company that's an ordinary company like other companies who do investing throughout the world?

Well, I don't think Magellan is an ordinary company. So that perhaps is just one thing to say upfront, but that calls for a lot of speculation. It's a good question. If I were to try to speculate, I would say you've asked about institutional investors. So initially, when Hamish went on medical leave and part of the business, you saw some clients pull their funds and redeem. And so I'd say that that's perhaps the best indicator of those who associated and valued him as particular person and personality in their decision making. We still have a lot of institutional clients with us. And so perhaps that's the group that want to stick with Magellan.