About The Magellan Global Trust
Magellan Global Trust is an actively managed global shares investment trust, which is managed by Magellan Financial Group Ltd (ASX: MFG).
MGG, under the listed investment trust (LIT) structure, has recognised that many retail investors prefer to receive more in the way of regular dividends. It targets a 4% cash distribution yield, distributed bi-annually.
Magellan Global focuses on global shares unlike most listed investment companies (LICs) which essentially just invest in ASX shares. Australia only has roughly 2% of the world’s share market capitalisation, meaning that if you don’t invest globally you are potentially missing out on majority of the world’s opportunities.
Fees
One of the main things to consider with any investment is what its costs are, as this reduces the net returns. The annual management fee and administration fee of the is 1.35%. This is quite expensive compared to cheap exchange traded funds (ETFs). It also charges a performance fee of 10% of the outperformance compared to its benchmarks, in which case is the higher of the MSCI World Net Total Return Index (AUD) and the Absolute Return Hurdle (the yield of 10-year Australian Government Bonds).
Performance
High fees can be justified if a fund is outperforming, and the Magellan Global Trust has been doing just that.
Since inception (October 2017), the Magellan Global Trust has outperformed the MSCI World Net Total Return Index by 3.3% after fees per year (by returning 17% per year). Over the past year it has outperformed by 4.4% after fees, achieving a 12% return.
Holdings
The Trust’s investment philosophy is to invest in a focused portfolio of 15-35 of the world’s best companies at a discount to intrinsic value.
As such, it has a high quality list of holdings which have excellent network effects and good growth runways like Facebook and Apple.
We learned this week that Magellan has taken up a large position in Chinese e-Commerce giant Alibaba. This is a very interesting move and it shows that Magellan is willing to invest anywhere in the world for returns. Investment flexibility is very useful.
Time To Buy Shares?
There are two factors to consider when assessing whether or not Magellan Global Trust is a good buy. You can compare the net asset value (NAV) per share against the share price to see if it’s cheap or expensive. In doing so, you would find that it’s currently at a 6% discount to the NAV.
You also need to think about whether or not the underlying holdings are good value as well. There’s no point buying something at a slight discount if the underlying holdings are really expensive. With this, it’s a lot harder to say if shares of Facebook, Apple etc. are good value or not themselves.
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Disclosure: Jaz owns shares of Magellan Global Trust at the time of writing, but this could change at any time.
