More Magic In The Making

Investors are set to reap more rewards as a hugely successful business finds new ways to grow

- Greg Hoffman

I first met Hamish Douglass in the early 2000s at an annual meeting of Cabcharge (now A2B). We ended up sitting next to each other in the front row and introducing ourselves. At the time he was a big shot at Deutsche Bank, but his passion for investing was obvious right away.

A few years later he co-founded Magellan Financial Group (ASX: MFG) with business partner Chris Mackay. On May 5, 2007, I sat down with the two of them and a few other investors for a memorable dinner in Omaha, Nebraska, ahead of the 2007 annual meeting of Warren Buffett’s Berkshire Hathaway.

At the time of our meal, on the banks of the Missouri River, Magellan was still working out its financial structure through a relatively complex transaction. A year later, the company had $336 million in funds under management and made an operating loss of $5 million.

In Magellan’s 2008 annual report, Douglass wrote: “As at 30 June 2008, the group had invested approximately $8 million in the establishment of the asset management business. This largely covers our upfront investment infrastructure and people. We believe that over time Magellan is likely to generate a very acceptable return on this investment. We believe that there is a substantial opportunity to build a world-class Australian-based asset management business focused on global equities and infrastructure.”

Now, 13 years later, Magellan boasts more than $100 billion in funds under management and should make an operating profit (before tax) of more than $500 million this financial year from that business.

It could be argued that there have been greater investors in the Australian funds management industry, but when it comes to building a business, there is no argument. The Magellan team leaves everyone in its dust.