Magellan Global Trust (ASX: MGG) is my largest portfolio position and one of my favourite listed investment businesses (along with a couple of others).
I'm sure most readers are familiar with Magellan Financial Group Ltd (ASX: MFG), a fund manager that largely focuses on global shares. Magellan Global Trust is its closed-end listed investment trust (LIT).
It aims to invest in 15 to 35 of the best global shares whilst delivering a 4% yield per annum and solid returns over the medium to long term.
The key reason why I think Magellan Global Trust's holdings are worth getting exposure to is the focus on businesses that are very high quality that have excellent economic moats, or sustainable competitive advantages.
To quote from the trust's recent annual review, "Capitalism is brutal. Typically, excess profit opportunities are competed away in short order. Investing in companies unable to defend against capitalism's relentless march is not compatible with our objectives. High-quality businesses, however, are the rare subset of the investment universe because they have an ability to resist the natural forces of capitalism, and sustainably generate excess returns and appreciate in value over the long term."
I think that speaks to why Magellan is such a strong performer and why Magellan Global Trust was able to deliver a 15.9% return (after fees) over the past year.
At 30 June 2019 its top holdings which represented more than 5% were Facebook, Microsoft, Alphabet, Starbucks, Apple, Visa, HCA Healthcare and MasterCard. It also held around 12% as cash, which is less than recent times but still reflects a cautious outlook. Cash is useful to protect against down markets and also useful for buying shares at discount prices.
Of the companies it held that delivered a negative return during the year (Kraft Heinz, eBay and Wells Fargo), Magellan Global Trust no longer holds any of them having exited those positions.
Foolish takeaway
I think it's very important that Australian investors diversify away from just ASX shares. There are many more opportunities out there. I think Magellan Global Trust is worth the fees as it offers good downside protection and continues to outperform its global index benchmark.
Whilst it's trading at a slight discount to its underlying net asset value (NAV) per share, I'm not jumping to buy more shares because of how highly the US share market is trading at the moment.
