Magellan’s Formica on the ‘huge opportunity’ from Vinva deal

Magellan executive chair Andrew Formica has shared further details on the strategic acquisition of a minority stake in Vinva.

Last week, it was announced that the fund manager had taken a 29 per cent minority stake in the parent company of Vinva Investment Management. 

Vinva manages active systematic equity strategies across Australian and global equity markets and has $22 billion in funds under management, having been founded in 2010.

This will see it distribute Vinva’s products and investment strategies through its global distribution team as part of an exclusive distribution agreement, excluding Australian institutional clients. The two firms also intend to collaborate on new product initiatives in Australia and globally.

Speaking on a shareholder webinar, Formica said he could see “significant capacity” for Vinva to grow beyond its current $22 billion in assets under management over the next decade.

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“There is significant capacity for Vinva, that’s a real attraction for us, it could be significantly larger than where they are today. That’s a real highlight of this opportunity for us; the process is so sound and the capacity constraints are so small. [It’s a] huge opportunity for us as a business.”

One reason that Vinva had sought out an external partner was the internalisation of fund management by superannuation funds. With fewer mandates being distributed by super funds nowadays, this led Vinva to look at wholesale investors where Magellan already has a large presence.

“The majority of their business is institutional – nearly all of it until a year ago when it started to move into the wholesale market. The AUM has fluctuated over the last three or four years, they are exposed to the same trends as any investment manager in the Australian institutional market, especially where super funds are bringing their investment management in-house or consolidating.

“I think it’s that trend where Australian institutions or super funds are focusing much more on cost rather than on the value created by their managers, that’s a large driver from the Vinva perspective. They’ve acknowledged they need to move away from that distribution channel into the rest of the Australian market and globally.”

Having previously acquired Airlie Funds Management in 2018 and a minority stake in Barrenjoey Capital Partners in early 2023, Formica discussed if the Vinva deal is the start of more corporate activity for the business.

“Given the significant opportunity that Vinva presents, that’s our real focus and the existing business. If other opportunities present themselves, then we could and should look at them as board and a business, but there is nothing that we are focused on or are looking at that we feel we need in the business beyond what we already have.”

Meanwhile, managing director Sophia Rahmani discussed the progress of the firm’s expansion into the US market which it has identified as a key growth market.

Rahmani, who joined the firm in May from Maple-Brown Abbott, said: “The US market is very wide and deep, so much of it is about how many selling agreements you have and access points to those big broker dealers in the US. 

“There are various ways you can achieve penetration into that market; building it yourself and we have some high-quality people in the US business already or acquiring a business or partnering with one that has access to those. We are open to options on how best to achieve that and are spending some time assessing that.”