Magellan Global Trust (ASX: MGG) released its monthly update to investors this afternoon.
This is a listed investment trust (LIT) run by Magellan Financial Group Ltd (ASX: MFG) that invests in global shares for shareholders.
I'm a firm believer that most Australian investors have far too little of their portfolio invested in overseas shares, so Magellan Global Trust could be a good way to get exposure.
It invests in what the investment team believe are the best businesses in the world. Its top 10 holdings (in alphabetical order) are Alphabet (Google), Apple, Facebook, HCA Healthcare, Kraft Heinz, Lowe's, Mastercard, Starbucks, Visa and Wells Fargo. This is a high-quality list of holdings.
Although all these companies are listed in America, they are global businesses which means they generate revenue across the globe. It's estimated that 46% of the holdings' revenue comes from the US, 12% from Western Europe, 12% from emerging markets and 9% from the rest of the world.
Eagle-eyed readers may have spotted the above percentages don't add up to 100%. That's because Magellan Global Trust currently has 22% of its portfolio as cash (and rounding effects). This offers significant protection for investors if the market goes down, it also means it has a good war chest for opportunities if the market does crash.
Unlike the ASX which is concentrated on banks and resources, Magellan's portfolio is diversified nicely. Around 16% is in consumer defensive shares, 1% mass market retail, 8% healthcare, 18% internet and eCommerce, 13% IT, 5% consumer discretionary, 9% payments, 5% financials and 3% infrastructure. The rest is in cash.
Magellan Global Trust aims to beat the MSCI World Net Total Return Index in Australian dollars. Since inception the index has returned 8.2% whilst Magellan Global Trust's portfolio has returned 9.6% after all ongoing fees and expenses. This assumes the distributions are re-invested.
It aims to pay a cash distribution yield of 4% per annum and it also offers a distribution re-investment plan with a handy 5% discount to the net asset value per security.
Foolish takeaway
I hope that Magellan Global Trust will continue to outperform the index benchmark. It offers investors a good mix of potential income and capital growth. If any new large quality businesses come along, Magellan Global Trust has the flexibility to invest in them.
At the moment it has an estimated underlying value per share of $1.64 and the share price is $1.58, suggesting a small discount. Of course, Magellan does come with reasonably high fees, currency risk and a fair chance of underperformance.
