Magellan Flagship Fund offers global opportunities

Fund boasted an impressive 35% return for the past year.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published October 16, 2013 4:28 pm AEDT

The Magellan Flagship Fund (ASX: MFF) recorded an investment return of approximately 35% for the year to June 30 2013 and achieved a net profit after tax of $80.8 million for the financial year.

The fund is structured as a listed investment company and offers investors the opportunity to diversify risk and benefit from the research practices of one of Australia's most successful investment boutiques. It's run by star fund manager Chris Mackay and operated by Magellan Financial Group (ASX: MFG). Magellan Group itself has enjoyed impressive growth in recent times, with its share price more than doubling in the last year alone.

Approximately two-thirds of the impressive performance was attributed to increases in the stock portfolio and one-third from currency benefits. The fund benefited from being effectively short the Australian dollar during the year and continues to be so.

For Australian investors the fund offers diversified exposure to foreign companies, currencies and business geographies. The 2013 Annual Report disclosed that some of the largest holdings include US banks Wells Fargo (NYSE: WFC) and Bank of New York Mellon (NYSE: BK), as well as global brands like McDonalds (NYSE: MCD) and technology giants Apple (Nasdaq: AAPL) and Microsoft (Nasdaq: MSFT).

At $1.38 per share it's currently trading not far below 52-week highs reached in August and the price reflects the high regard in which it is held. For the three months to September 30 2013, currency movements have been described as unfavourable and investment returns below last year's levels. A final dividend of one cent per share was also declared.

Foolish takeaway

The fund offers leverage to the global economy and some of the world's biggest brands and businesses. Investors wanting to diversify away from exposure to Australian companies should consider its merits. However they should look to achieve a price commensurate, or at a discount to net tangible assets. Those paying a premium will be relying on superior performance.

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Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

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