Brexit and the Fed impact Magellan
Magellan Asset Management has said that its global funds were negatively impacted by both the Brexit vote and thinking that the US Federal Reserve would progressively increase short-term interest rates over 12 months, when instead, it only made one rate increase.
Magellan Asset Management's chief executive, chief investment officer (CIO) and lead portfolio manager (PM), Hamish Douglass, said in the company's annual investor report, "clearly I have been wrong on the rate of tightening of US monetary policy and the direction of longer term bond yields over the past 12 months. This has impacted our investment performance over the period".
He said that the Fed would likely tighten monetary policy over the next few years and as a result, Magellan moderated their expectations on the likely rise of longer-term bond yields over the next three to five years.
The Brexit vote materially impacted the share price of Llyods Banking Group, as it fell 23 per cent from 22 June 2016 to 30 June, he said.
The British pound also fell 10 per cent during the same period, which impacted the Australian dollar performance of Magellan's investment in Llyods Banking Group and Tesco. Despite that, Llyods and Tesco would deliver attractive investments returns over the medium term, he said.
He also said:
- The Magellan Global fund returned 13.1 per cent over three years, 19 per cent over five-year periods and -0.1 per cent in Australian dollars after fees over the last 12 months;
- The Magellan Global Fund (hedged) returned 5.6 per cent over two-years, 8.7 per cent over years and -0.9 per cent over the last 12 months;
- The Magellan Global Equities Fund (currency hedged) returned -4.6 per cent since inception on 4 August 2015; and
- The Magellan Global Equity funds returned -0.1 per cent since its launch in March 2015
Going forward, the fund manager would focus on the rate of technological advancement and how that would impact, challenge and advance investment paradigms.
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