LIC & LIT Listed Investment Companies (LICs) 2019

It will be interesting to see what the realised "accretive" value to share holders becomes!
I suppose only really relevant if you were to sell.

 

Of course it’ll be accretive, they said so themselves. How untrusting of you.

 

@SatayKing, how’s the cash buffer reduction going? Spent it all yet?

 

10 to go.

VGS.

And further to the Magellan product I assume if you do buy VGS you'd get some exposure to those companies anyway. Not in such concentration however.

 

Their existing unlisted high conviction fund (which the new fund will mimic) is returning slightly above 16% since the inception in 2013. And also their newest listed fund MGG is returning above 17%. According to their website the return is after fees and outperform the benchmark.
https://www.magellangroup.com.au/funds/magellan-high-conviction-fund/
https://www.magellangroup.com.au/funds/magellan-global-trust-asx-mgg/

Although fees are high, I still think that the funds definitely show quality results. Given the discounts in the IPO, will it provide a reduced risk to invest in quality fund like MTT?

Oh also, how does NAV is calculated for the new IPO? I understand they said there will have 10 stocks in their portfolio. would it be then based on their purchase price? as share price could go up/down until the IPO closed.

 

I can’t help but wonder if much of their performance has come from simply riding on the back of the monster US bull market? I might be incorrect as I don’t follow these but I thought I’d read they’ve under performed the index as they’ve continued to increase in size? Could well be wrong. To lazy to check this morning.

With MGG the potential red flag is the targeted yield of 4%. From what I recall this is near double the distribution yield of the similar unlisted fund. Where will it come from? They also can change this at any time without shareholder approval.

 

"Where net income or net capital gains earned in a particular year exceeds the Target Cash Distribution, Magellan intends that the potion of any distribution in excess of the Target Cash Distribution will be required to be reinvested as additional Units in the Trust in accordance with the DRP rules.

Magellan retains the discretion to amend the distribution policy of the Trust."

 

Yes exactly.

And

Just testing to see if others took the time to think about and / or read the reports posted previously.

 

There you are. Problem solved. Simple as.

 

Yes I heard you the first time.

 

@Nodrog agree with your sentiment. Magellan has out performed MSCI world index but considering it is almost exclusively US equities i find myself comparing it to the S and P and i dont think it has outperformed there.

I guess Hamish would argue it has the ability to move between markets thus not a fair comparison.

 

Managing LIC discounts and premiums

 

Given the size of Magellan’s FUM and concentrated portfolios this won’t be an easy task I would think.

 

Further:

https://www.firstlinks.com.au/uploads/201909/IIR-Monthly-LIC-Report-11-September-2019.pdf

 

More interesting reads there

A checklist for buying LICs at a discount

Plenty of LICs trade at a discount to their NTA value, often for good reasons, but there are opportunities to benefit from a narrowing of the discount if an investor knows what to look for.


The merits of investing in LICs at a discount

It's important to consider why a LIC is trading at a discount, as what might appear good value worth buying may be built into the price for many years, and the discount may even worsen.

Watch for LICs that never return to par

It's important to consider why a LIC is trading at a discount, as what might appear good value worth buying may be built into the price for many years, and the discount may even worsen.

 

Isn't this the same with many other LICs? if negative, return of capital or if positive, keep the return to growth are possibilities. But agree that this may not be for the old LICs.

Wouldn't it be the same relative to the benchmark that they use to measure performance which for MGG, it is MSCI World Net Total Return Index (AUD)?

 

Sell 10 or so holdings in MGG, redeploy the proceeds into the remaining holdings and you have a high conviction LIT.

What??

 

Re: the PT article on yield trap, the important questions are:
a) how do you tell whether a profit-retaining company is going to be a consistent growth champion? i.e. when can you say that you are no longer speculating and confidently jump on board?

b) when does a proven growth champion run out of runway? Continuing to buy in at progressively inflated P/E will at some point no longer be a good move as the company stabilises

 

Speaking only for myself it is a reason why I outsource the decision of share selection to the management of the LICs I hold and, in the event they get it wrong, include ETFs (in goes the good, out goes the bad.)

 

Agree, the fund is very narrow hence the high conviction. Probably, it would suit certain type of investors. I think the market cap for this new MHH fund wouldn't be as large as MGG, which currently is the largest global fund based on the market cap.

Btw, I hold the mothership MFG and MGG