Benefits of investing in the Magellan Global Equities Fund (Currency Hedged)

Investing in the Fund offers investors a range of benefits, including:

• The ability to trade the Units on the ASX during normal ASX trading hours;
• The ability to track the performance of the Units on the ASX in a transparent manner;
• Access to the Investment Manager’s investment expertise and a professionally managed global equity portfolio;
• Access to attractive investment opportunities in offshore markets;
• Hedging of foreign currency exposure;
• An attractive Target Cash Distribution yield of 4% per annum;
• Prudent risk management; and
• Participation in any capital appreciation and income distributions of the Fund.

An investment in the Fund may suit investors who are seeking a long-term investment exposure to international equities.

An investment in the Fund may suit investors who are seeking a long-term investment exposure to international equities.

Significant features 

The primary objectives of the Fund are to achieve attractive risk‐adjusted returns over the medium to long‐term, while reducing the risk of permanent capital loss. The Fund offers investors an opportunity to invest in a specialised and focused global equity fund.

In its capacity as Investment Manager, the Responsible Entity aims to invest in companies that have sustainable competitive advantages which translate into returns on capital in excess of their cost of capital for a sustained period of time. The Responsible Entity endeavours to acquire these companies at discounts to their assessed intrinsic value. The Fund's portfolio will comprise 20 to 40 investments. The Responsible Entity believes such a portfolio will achieve sufficient diversification to ensure the Fund is not overly correlated to a single company, or to industry specific or macroeconomic risks.

It is the Responsible Entity's intention to substantially hedge the capital component of the foreign currency exposure of the Fund arising from investments in overseas markets back to Australian Dollars.

Investment philosophy

The Magellan Global Equities Fund (Currency Hedged) seeks to invest in outstanding companies at attractive prices, while exercising a deep understanding of the macroeconomic environment to manage investment risk.

Magellan perceives outstanding companies to be those that are able to sustainably exploit competitive advantages in order to continually earn returns on capital that are materially in excess of their cost of capital.

While Magellan is extremely focused on fundamental business value, it is not a typical 'value' investor. The Magellan Global Equities Fund (Currency Hedged) will invest in companies that have relatively high price-to-earnings and price-to-book multiples, provided that their businesses are outstanding and their shares are trading at an appropriate discount to their assessed intrinsic value. Equities that appear undervalued on the basis of a low price-to-earnings or price-to-book multiples will often prove to be poor investments if the underlying business is fundamentally weak and exhibits poor returns on capital.

How we invest your money

Portfolio construction

The Fund's investment process integrates three key disciplines:

1. Intensive bottom-up stock analysis and industry research.
2. Broad and detailed macroeconomic insight.
3. Rigorous portfolio construction and risk discipline.

Intensive bottom-up stock analysis and industry research is undertaken in order to identify outstanding companies. This involves the assessment of potential investments against key quality criteria, as well as assessments of their intrinsic value. Magellan uses a proprietary ranking tool, the Magellan Conviction Scoring Matrix, to rank these companies based on these factors. This process enables the portfolio to be weighted towards higher conviction ideas (on a risk-adjusted basis).

Magellan's detailed macroeconomic analysis is overlayed during portfolio construction, alongside the application of both fixed and dynamic risk limits. This process ensures that the portfolio is not overly exposed to aggregation risk (risk which arises from correlated portfolio positions) or macroeconomic event risk. Macroeconomic event risk can be a significant source of negative returns for investors. Magellan will make significant changes to the portfolio if it believes that macroeconomic events could lead to significant and sustained loss in value for investors. Such events would include a financial crisis, a sustained oil price shock, a global pandemic or a major global conflict.

Investments held

The Fund primarily invests in the securities of companies listed on stock exchanges around the world, but will also have some exposure to cash and cash equivalents. The Fund can use foreign exchange contracts to facilitate settlement of stock purchases. It is the Responsible Entity's intention to substantially hedge the capital component of the foreign currency exposure of the Fund arising from investments in overseas markets back to Australian Dollars.

Asset classes and allocation ranges

The Fund's assets are typically invested within the following asset allocation ranges:

• Global listed securities: 80% - 100%
• Cash and cash equivalents: 0% - 20%

Borrowing restrictions

The Fund may borrow against all or part of its investment portfolio, provided that, at the time any new borrowing is entered into, the aggregate of those new borrowings and any pre-existing borrowings does not exceed 5% of the Fund's gross asset value.