I believe that Magellan Global Trust (ASX: MGG) is a great semi-passive choice for all investors looking to increase their portfolio's exposure to overseas earnings.
It's a listed investment trust (LIT) that is run by Magellan Financial Group Ltd (ASX: MFG). The trust has a very similar strategy to the Magellan Global Fund, which has delivered a return after fees of better than 9% per annum since inception, over the past 10 years, 9 years and so on all the way to just the last year's performance. The Magellan Global Fund has also outperformed the MSCI World Index on a three-year rolling monthly basis more than 90% of the time.
Past performance is not an indicator of future performance, however this consistency may prove somewhat of a guide for Magellan. The Magellan Global Trust has outperformed its benchmark since inception last year.
It's always a good idea to buy into a high-performing fund, but I think there are three good reasons to do so sooner rather than later:
- It's trading at a discount to its net asset value (NAV). The share price is $1.66 whilst the intraday indicative NAV is $1.69. A 2% discount is nothing to shout about, but buying at a discount of a market-beating business is attractive.
- FAANG falls are long-term opportunities. Facebook's recent share price fall affected the trust's value. At the end of FY18 Facebook was the biggest holding at 8.7%, therefore over the next year or two it could be the biggest contributor to the trust's performance if Facebook proves the doubters wrong.
- Australian election. Labor appear to be on course to win the upcoming election. One of the key pledges is to remove franking credit refunds. If the refund part of franking credits is indeed removed it could make REITs and global-focused funds more attractive to income investors. The closed-end structure of Magellan Global Trust means the share price could appreciate to a premium.
Foolish takeaway
Whilst the fees of Magellan Global Trust are fairly high, if it keeps outperforming the index after fees then it's worth the expense. It also comes with an attractive 5% discount re-investment plan. I'm looking to slowly accumulate on market dips or when the discount widens.
