A watch recommendation differs from a “buy back” rating in which a financial product is no longer deemed worthy of investment.

Since Mr. Douglass’ indefinite leave, Magellan has been in intense contact with research houses such as Lonsec, Zenith and Morningstar to provide assurances on the investment process.

These companies provide research and ratings on managed funds which are in turn used by financial planners. They are considered the main gatekeepers of lucrative investment flows.

“Evidence suggests that research firm recommendations are, on average, an indicator of future fund performance. Funds that have favorable recommendations receive higher net inflows, and vice versa,” said a Deloitte report commissioned by the corporate regulator in 2021.

Major personal changes often trigger rating reviews and, in some cases, downgrades that can influence fund flows.

Lonsec and Zenith also provide model portfolio services to financial planners in which they construct portfolios.

Magellan’s global fund has been a mainstay of Zenith’s model portfolios, which is responsible for hundreds of millions of dollars in flows.

Zenith has not yet responded to questions about its assessment of Magellan’s funds and is not making its ratings public.

Key person risk

Morningstar on Monday placed seven global Magellan funds as “under review” following Mr Douglass’ furlough announcement, given his “integral involvement”.

“Key man risk is an ongoing issue for global equity strategies, although we note that there is considerable depth of talent at Magellan that has not been as visible to the public eye,” he said. said Morningstar.

“A formal review of these strategies, including a full parent review, will be undertaken in the coming weeks and our updated view will be released shortly thereafter.”

Magellan announced on Monday that it has $93.53 billion in assets under management, including $62.32 billion in global equities.

In total, approximately 30% of Magellan’s funds under management are managed for retail investors and approximately 70% for institutions.

Magellan shares were trading up 2.9% as of 1:00 p.m. AEST at $18.12; however, they have fallen 15.3% this year.

Magellan shares have fallen 63.5% over the past year as its global fund’s performance lagged the market, triggering capital outflows. Late last year, Magellan’s biggest client, UK wealth manager St James’s Place, bought out $22 billion.