Mr Douglass said that neither he nor Magellan’s clients had “any concerns” about the underperformance of its global equity strategy relative to the MSCI benchmark and noted that the strategy had performed “extremely strongly” through the market volatility in early 2020.
“In the last 12 months we had a major stress event and we came through it with flying colours, when many other people didn’t come through that period. The underlying performance of the strategy remains in line with the objectives we set,” Mr Douglass said.
Mr Douglass also said that assertions there had been a rotation out of growth and into value were “the biggest load of crap (he’d) ever heard” and that the true rotation was out of defensive assets and into those with greater economic exposure, including travel assets – which “went through the roof”.
“I think people don’t really understand what the strategy does – unlike our clients – and people then focus on the MCSI. We get wild swings. Our portfolio looks nothing like the benchmark…over time we’d like to beat it over seven year periods, but in the short term ours is not constructed anything like that benchmark at all. We’ve been 20 per cent above the benchmark and we’ve been 10 per cent below the benchmark at different points,” Mr Douglass said, adding that the strategy had performed “when the chips were down”.
“I see no evidence at all that we have a client outflow risk sitting in our strategy.”
Mr Douglass also warned that there is “very little margin for error” around COVID-19 and that lab experiments have shown that a new, vaccine-resistant strain of COVID-19 could very quickly evolve, ravaging global markets.
“We’re pretty cautiously invested at the moment because this could go in any direction at any time and we’re not through it at the moment. People think that the vaccines are going to hold up and we’ll just recode them – if only it was that simple,” Mr Douglass said.
