Magellan’s New High Conviction ASX-Listed Trust
Magellan Financial Group Ltd (ASX: MFG) today announced the initial public offering (IPO) of the Magellan High Conviction Trust.
It’s a fund/trust which aims to invest in the best 8-to-12 best stock ideas from the Magellan investment team. In its ASX update today, Magellan said the unlisted version of the trust had returned 16.6% per year net of fees since it started in July 2013.
Investors in Magellan can apply for up to $50,000 in the new trust and may receive a loyalty reward of additional units worth 7.5% of their allotment. General public applications will receive additional units worth 2.5% of the value allotted to them.
Magellan will pay for these one-off costs, but it isn’t appointing a broker syndicate and is not paying any fees or commissions to brokers or advisers to handle the raising.
CEO Hamish Douglass said he would be taking up his priority offer and also subscribe for $20 million under the wholesale offer. To fund these new costs, Magellan (the company) will be raising $275 million from institutional investors by selling new shares in the company at $55.20.
The high-conviction trust will target a 3% distribution/dividend yield but it will have an annual management fee of 1.5% per year plus a performance fee of 10% over a single hurdle of 10% per year total return after management fees.
That’s quite a high fee which will eat into investors’ returns from the trust. Still, Magellan is a very popular fund manager right now.
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