It’s not just the gossip-hungry who have been devouring every bit of news about marriage bust-ups among Sydney’s fund manager set – or, at least, it shouldn’t be.
For while many may be reading the details of the dissolution of the marital bonds between fund manager Charlie Aitken and his wife, Ellie, with an eye to the details (Charlie has hooked up with his business partner’s wife, Hollie Nasser, who was Ellie’s best friend) investors who have put their money with Aitken Investment Management have a financial interest, not just a prurient one, in the unfolding drama.
For the same reason, investors in Magellan Financial Group and the funds it manages should also be paying attention to the much less high-profile separation between the group’s billionaire co-founder and chief investment officer, Hamish Douglass, and his wife, Alexandra.
This is because fund manager divorce can be a wealth hazard not only for the executive in question, but for the investors who trust them to earn their keep by outperforming the market, at least according to one 2016 study published in the Journal of Financial Economics.
In a the six-month period surrounding the divorce of a hedge fund manager, returns to investors were 4.33% a year less than before the breakup, it found.
The study, Limited Attention, Marital Events and Hedge Funds, by academics from Florida and Singapore, suggests that investment professionals who usually spend their days monitoring the flow of news coming from markets like the ASX might be better off refreshing the Daily Mail’s sidebar of shame, which has covered the Aitken family’s demerger in excruciating detail.
“The deleterious effects of a divorce extend beyond the six-month event window,” the academics said in their paper. “Hedge funds continue to underperform by a risk-adjusted 2.29% per annum up to two years post divorce.”
So far, Aitken’s fund, the AIM Global High Conviction Fund, has yet to show any signs of damage from its founder’s separation. Performance has not been stellar, but nor has it fallen off a cliff. As of its most recent update, last month, the fund was returning 26.4% a year to its investors – just shy of the 26.6% benchmark Aitken has set for it.
It remains to be seen whether the continuous coverage of his formerly private life in the pages of the Mail and the Daily Telegraph since late November, when news broke that his 20-year marriage was over, will start to eat into returns.
Among developments lovingly documented by the tabloid media since the bust-up, Ellie Aitken and Nasser, who is the wife of his investment partner Chris Nasser, have been duelling via Instagram and there has been an alleged verbal confrontation – captured by photographers – between Aitken and his estranged wife outside the Aitken marital home in Sydney’s eastern suburbs
In a direct financial hit to Aitken’s empire, Chris Nasser is also reported to have liquidated $7.5m he had with the group – a big chunk of change given its flagship fund had assets under management of just $93m as of February, according to Morningstar data.
Over at the much bigger Magellan, which looks after more than $116bn worth of assets, events are proceeding in a slightly more dignified fashion.
In a statement issued to the stock exchange on Wednesday, the Douglasses said that they “separated some months ago”.
“As our family and friends appreciate, we both remain extremely close and united,” the no-longer-a-pair said. “We continue to spend considerable time together, and as a family.”
They said media speculation that they planned to sell some of their shares in Magellan was “unfounded” and they had no intention of offloading any of them.
Magellan has been a poor investment this year; shares in the company have slumped from about $55 in early July to less than $30 this week.
There’s also been instability in the corner office, with the chief executive, Brett Cairns, unexpectedly resigning “for personal reasons” on Monday.
The Douglass separation is the biggest in the Australian fund manager world since the 2016 divorce of the Platinum Asset Manager founder, Kerr Neilson, and his wife, Judith, which resulted in him handing her a significant chunk of his $3bn fortune.
Bad news for Kerr but good news for the news business, including Guardian Australia, which has benefited from the subsequent establishment of the Judith Neilson Institute.
If divorce is bad for business, surely new romance brings back the bucks? Could a Hot Fund Manager Summer put a rocket under returns?
Not according to the study.
In the six months around getting married, fund managers underperformed by 3.13%, and they continued to underperform by 3.16% a year for the two years after walking down the aisle.
“We argue that marriage and divorce are deeply personal events that distract fund managers from their investment duties,” the authors said.
“These results provide strong evidence that the distractions associated with marital events are detrimental to professional portfolio management.”
