I believe that Magellan Global Trust (ASX: MGG) is one of the best ASX shares to beat the returns of the ASX 200.
Magellan Global Trust is a listed investment trust (LIT) that is operated by Magellan Financial Group Ltd (ASX: MFG), it invests in international shares.
One of the main reasons why I don't think the ASX 200 is such a great investment is that it is dominated by mature, low-growth businesses like Commonwealth Bank of Australia (ASX: CBA) and BHP Billiton Limited (ASX: BHP). An index's return is largely influenced by its biggest holdings.
Magellan Global Trust invests in truly global businesses with much brighter growth prospects like Alphabet, Facebook, Visa, Starbucks and HCA Healthcare.
I also like that Magellan Global Trust's portfolio is more diversified than the ASX 200 which is dominated by banks and resource businesses. The Magellan portfolio is spread across consumer businesses, IT, internet & eCommerce, payment businesses, financials and other sectors.
Its portfolio can also outperform in negative months because at the end of November 2018 around 20% of its portfolio value was cash. That means only 80% of the portfolio is exposed to market downturns. Cash is a good defensive tool in the short-term.
The ASX 200 is known for its bigger dividends due to the big dividend yields of shares like National Australia Bank Ltd (ASX: NAB). However, Magellan Global Trust targets a cash distribution yield of 4% paid semi-annually, which is a solid source of income too.
The proof of the strategy is in the pudding. Over the past year the Magellan Global Trust's net return, after all fees, has been 9.5%. This net return outperformed the MSCI World Net Total Return Index (AUD) by 5.4% – which is good for a portfolio with a large cash holding.
Foolish takeaway
After the recent falls in the share market, today could be a decent time to buy some Magellan Global Trust. I believe it could outperform the index after fees materially by single digits over the long-term.
