Thomas is also bullish on payments giants Visa and Mastercard (Magellan’s two key holdings), saying their revenue, charged as a percentage of transactions, will grow as prices rise. “As we spend more because of inflation, they make more money and their costs don’t increase with inflation,” Thomas says.

He also added exposure to drinks giant Diageo, which owns brands such as Guinness and Johnnie Walker, to get “a bit more exposure to the reopening story”.

At the same time, Thomas says the fund has sold off some investment bets, though she adds that the fund doesn’t generally make major changes to its overall portfolio.

Perhaps the most notable change has been that of Netflix – a title that has fallen over 60% this year. Previously one of Magellan’s largest positions, Netflix made up 5.3% of the portfolio as of December 31, fell to 2.9% in March and has fallen further since then.

Thomas says Netflix’s surprisingly slow subscriber growth, the extent of password sharing, and the fact that he was considering running ads all led to a major shift in how Magellan viewed the company and its customers. growth prospects.

“Everyone thought they still had about 30% market share ahead of them to achieve full penetration – in fact, they were pretty much fully penetrated.”

The fund has also reduced its exposure to Facebook owner Meta – its shares are down about 50% so far this year after poor financial results in February.

And Thomas said in a recent interview with Future Generation, a philanthropic fund manager for whom Magellan manages the money, that he decided to sell his stake in Chinese tech giant Alibaba after the investment filing “broken”.

Thomas, who grew up in outback Queensland, spent the early years of his career as an analyst before joining Magellan co-founders Hamish Douglass and Chris Mackay when they started the business in 2007.

She became head of research but left in 2017 following a restructuring and joined fund manager Alphinity. Thomas says she wasn’t kicked out of Magellan in 2017, but says: “It was a very difficult time for Hamish and me.”

Thomas says when Douglass asked him to return to Magellan last summer, it was an opportunity to get back to working on his global fund, which had been his “happy place”.

“You have to go find a happy place if you’re not there, and he gave me the opportunity for a happy place – to do something that I like to do with really smart people.”

Magellan has had a tumultuous year, with its share price falling 70% in the past 12 months amid underperformance, cash outflows and February news Douglass would take sick leave after a period of “intense pressure and focus” both personally and professionally. life.

Earlier this month, the company announced that Douglass would return as a consultant in October, while its next chief executive, David George, will take over next month.

Thomas agrees that the central role Douglass previously played at Magellan has created “key man risk”, but she is optimistic that he will return soon, describing him as a “win-win”.

Ultimately, however, Magellan’s ability to turn the tide will depend on how well its funds perform.

Morningstar analyst Shaun Ler said in a recent report that with Douglass likely to have a lower profile than before, other managers, including Thomas, would come under pressure to perform. “Investment performance will be the sole focus of investors, and the scrutiny of Chris Mackay, Nikki Thomas and Arvid Streimann to deliver outperformance in the global equity core strategy will intensify,” said Ler, who believes that Magellan shares are undervalued.

The latest figures for May show that the global fund Magellan is underperforming: returns were minus 4.9% last year, compared to a gain of 2.7% for the MSCI World index.

With the stock markets plummeting, the fund also fell short of one of its main goals – to protect investors’ money in a downturn. Thomas isn’t afraid of that, saying some investments, including Netflix, didn’t perform as expected, while the fund also missed the rally in energy stocks.

“That’s a really fair question, a question I think we get asked a lot, and it’s a tough question because the optics is that it didn’t do what it intended to do” , she says.

Still, she says there have been other clients who have supported Magellan through the tough times, and says that in the 15 years since its inception, the fund has beaten its benchmark.

Magellan’s attempt to turn around its performance also comes at a time of great uncertainty, amid growing concerns about inflation, the risk of a global recession and geopolitical instability.

Speaking of US and global markets, Thomas says a lot will depend on what US companies reveal about their outlook over the next reporting season, and if there are any big downgrades, there could be more turbulence ahead. .

“What companies report and how much they lower their forecasts will be very informative as to where the market goes from here.”

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