The Magellan Financial Group Ltd
(ASX: MFG) share price went up 5% yesterday, likely due to one of its investments.
What happened on Monday to send the Magellan share price higher?
There were two areas of news that likely drove the Magellan share price higher. Firstly, it’s important to remember that last year Magellan invested in the new investment bank called Barrenjoey
Magellan’s investment comprised the issue of approximately 1.2 million Magellan shares and $90 million of cash to take a 40% economic stake in Barrenjoey. Magellan has a 4.99% voting interest. It is also providing Barrenjoey with a $50 million working capital facility to support the growth of the business.
And Barrenjoey has been busy. It has been quickly snapping up a lot of talent from across the Australian investment bank world. Many of the people that it has hired are seen as the best, or among the best, at what they do.
UBS hiring
According to reporting by Nine Entertainment Co Holdings Ltd (ASX: NEC) newspapers, such as the Sydney Morning Herald, Monday saw 10 senior UBS executives resign to join Barrenjoey, including banking analyst Jonathan Mott, mining analyst Glyn Lawcock and gambling and transport analyst Matt Ryan.
ASX licence
The SMH also reported yesterday that Barrenjoey Capital has been given a licence to operate on the ASX and Chi-X platforms as a market participant, which will mean that it can clear and settle trades under its own banner. Barrenjoey reportedly plans to offer services such as fixed income, equities and corporate advisory to high-end clients.
Is this good for the Magellan share price?
This is clearly good news for Barrenjoey and, indirectly, Magellan, because the fund manager owns such a large stake of the new investment bank.
As a Magellan shareholder, I’m excited by the potential of Barrenjoey. I’m not in the investment banking world, but I imagine you need the best people to do well in what seems to be a person-focused and talent-focused industry.
The Magellan share price will still be directed by the growth of its funds under management (FUM) and the performance of its funds. I think it will perform soundly over the longer-term with the investing style that it has and the shares it picks.
