Why would investors want to consider Magellan Global Equities Fund?
Many of the ETFs that investors are drawn to are passive investment vehicles. Meaning, those ETFs just try to follow what an underlying index does. If CSL (ASX: CSL) or Amazon becomes a larger weighting in the index then the passive ETF must also increase the weighting.
It’s possible to operate these passive ETFs for very low fees – it can just be done by computers. But there are some actively managed ETFs out there as well. Previously, fund managers would have operated with an unlisted fund or perhaps as a listed investment company (LIC).
But the attractiveness of ETFs also now causing some fund managers like Magellan Financial Group (ASX: MFG) to offer their investment services via ETFs.
The Magellan Global Equities Fund is the ASX-listed version of the Magellan Global Fund, which has performed very well since inception and through the 2010s. Over the past decade the Magellan Global Fund has returned an average of 15.77% per year.
Magellan’s philosophy is to invest in high quality companies with enduring competitive advantages.
What are some of the shares it’s invested in?
Some of its biggest holdings are: Alibaba, Alphabet (Google), Crown Castle, Starbucks, Microsoft, Tencent, Facebook, SAP, Reckitt Benckiser and Novartis.
I like these shares. Most of them are completely ingrained into our lives, particularly products/services offered by businesses like Microsoft, Facebook, Google and Reckitt Benckiser.
Those names are the types of businesses that seem as though they could be around for many years and generate good earnings growth.
Does it have an expensive management fee?
The annual management fee is 1.35% per annum plus 10% of the outperformance, if it outperforms its benchmarks of the MSCI World Net Total Return Index or the yield of the 10-year Australian government bond.
This does seem expensive compared to passive index ETFs, but it’s the net returns that are the most important factor. Magellan Global Equities Fund has outperformed after fees over the past six months, 12 months, three years and five years. I think that shows that the fees don’t have to be a deterrent to investing.
I think this is one of the best active ETFs around, Magellan is a quality performer with its focus on quality shares. I wouldn’t mind owning units for the long term, though I’m wary about what may happen later this year with the upcoming US election.