Magellan Global Fund 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. It aims to achieve attractive risk-adjusted returns over the medium to long term.
For the quarter, the largest contributors were the holdings in Intuit, Alphabet, Trane Technologies and UnitedHealth Group which all rose over 5% in the quarter. Intuit reported excellent quarterly results and issued FY24 guidance that highlighted the resilience of its business model and followed with an investor day showcasing how AI will be built into its product suite and the associated benefits. Alphabet reported quarter results demonstrating stable trends in advertising and continued cost control and has increasingly showed product innovation alleviating concerns of Search disruption from AI / ChatGPT. Trane Technologies delivered a robust secondquarter result and raised its full-year guidance with the ongoing strong demand in commercial HVAC a standout.
Detractors were led by LVMH, ASML, Chipotle Mexican Grill, HCA Healthcare and Apple. This serves as a strong reminder of how volatility is not risk. Three of these – HCA Healthcare, Chipotle Mexican Grill and ASML – were among our significant positive contributors in the year to June! As we highlighted then, we believe that these are superbly positioned and wellmanaged companies that should do well over the long term and our conviction remains high. LVMH has fallen back alongside the luxury sector as the big early 2023 uptick in the share price on expectations of a material boost from China’s reopening has reset and growth of the sector normalises from elevated levels. We do anticipate strength in Chinese offshore travel and spend on luxury in coming months and for wealthy consumers to continue to spend on LVMH products, albeit at a lower level of growth than seen in recent quarters.
Near-term softness in overall semiconductor demand (notwithstanding strong AI investments) has weighed on industry sentiment. Tool makers like ASML have also been affected by Taiwan Semiconductor Manufacturing Company potentially pushing out orders for its Arizona fab due to talent shortages. We see persistent, structurally higher demand ahead though the exact timing of orders is difficult to predict. Chipotle continues to see robust sales growth and improving cost levels and is executing superbly. The uptick in store expansion, towards a 10% run rate, is still expected but perhaps a little later in 2024. HCA has benefited from improving labour costs as use of relief nurses has fallen to more normal levels and hospital utilisation for surgeries and delayed procedures has come back. We expect Apple to deliver another good result this month – recent news regarding China’s government acting less favourably towards Apple bears watching.
What is Magellan Global Magellan Global is an Managed Funds investment product that is benchmarked against Developed -World Index and sits inside the Foreign Equity - Large Fundamental Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Magellan Global has Assets Under Management of 13.38 BN with a management fee of 1.35%, a performance fee of 10.00% and a buy/sell spread fee of 0.14%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the Magellan Global has returned 0.9% in the last month. The previous three years have returned 7.05% annualised and 11.47% each year since inception, which is when the Magellan Global first started.
How is risk measured in this investment product?
There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Magellan Global first started, the Sharpe ratio is 0.7 with an annualised volatility of 11.47%. The maximum drawdown of the investment product in the last 12 months is -5.51% and -19.36% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product?
Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Magellan Global has a 12-month excess return when compared to the Foreign Equity - Large Fundamental Index of -0.82% and 2.67% since inception.
Does the investment product produce Alpha over its Peers?
Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Magellan Global has produced Alpha over the Foreign Equity - Large Fundamental Index of 0.12% in the last 12 months and 0.3% since inception.
What are similar investment products?
For a full list of investment products in the Foreign Equity - Large Fundamental Index category, you can click here for the Peer Investment Report.
What level of diversification will Magellan Global provide?
Magellan Global has a correlation coefficient of 0.84 and a beta of 0.88 when compared to the Foreign Equity - Large Fundamental Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers?
For a full quantitative report on Magellan Global and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Magellan Global with the Developed -World Index?
For a full quantitative report on Magellan Global compared to the Developed -World Index, you can click here.
Can I sort and compare the Magellan Global to do my own analysis?
To sort and compare the Magellan Global financial metrics, please refer to the table above.
Has the Magellan Global been independently verified by SMSF Mate?
This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
How can I invest in Magellan Global?
How do I get in contact with the Magellan Global?
Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the Magellan Global. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - June 30, 2023 A relatively concentrated portfolio of 20- 40 high quality securities constructed with strict risk discipline and macroeconomic insight seeking to achieve strong riskadjusted, not benchmark-relative returns.
Typical cash and cash equivalents exposure between 0 – 20%.
Performance Commentary - April 30, 2023 A relatively concentrated portfolio of 20- 40 high quality securities constructed with strict risk discipline and macroeconomic insight seeking to achieve strong riskadjusted, not benchmark-relative returns. Typical cash and cash equivalents exposure between 0 – 20%
Performance Commentary - March 31, 2023
Performance Commentary - January 31, 2023
Performance Commentary - December 31, 2022 The Magellan Global strategy rose for the quarter. The biggest positive contributions came from the investments in Mastercard, Visa and HCA, as well as McDonald’s and Yum! Brands. With high inflation as a backdrop, these companies have positive exposure to nominal growth, and the resilience of consumer spending benefits these businesses. HCA and the restaurant chains are supported by normalising demand patterns in their businesses post the pandemic period.
The biggest detractors in local-currency terms in the quarter were Amazon, Alphabet and Crown Castle. Both Amazon and Alphabet have found themselves on the wrong side of excess demand driven by pandemic stimulus that is now unwinding, and ultra-low interest rates. Both are needing to cut costs to realign to normalising revenues and margins have been pressured. Crown Castle, like most in real estate, has been de-rated on higher interest rates but is also experiencing a slower outlook for growth in 2023 on lower demand from its telecommunications customers. We exited Crown Castle during the quarter.
Performance Commentary - September 30, 2022 The portfolio recorded a negative return for the quarter.
The biggest positive contributions came from the investments in Chipotle Mexican Grill, Diageo and Lowe’s, three relatively defensive consumer companies that recorded strong operating performances in their most recent results and are seeing upgrades to earnings expectations.
Given widespread falls across the market, the biggest detractors in local-currency terms were the strategy’s largest holdings of Microsoft, Alphabet and Visa. There was no material news of note for these companies but the strength of the US dollar is expected to weigh on reported earnings given their multinational businesses and the pressure of rising rates on economic growth will likely be felt by most companies. A new push for increased regulation of credit cards in the US was made and this may have added to caution on Visa.
Performance Commentary - June 30, 2022 The portfolio posted a negative return for the quarter. Among the biggest detractors were the investments in Alphabet, Microsoft and Intercontinental Exchange. Alphabet, the parent of Google, dropped after first-quarter revenue growth of 20% disappointed high expectations due to poorer-than-expected ad sales in Europe and on YouTube. Microsoft slid on news the EU is probing allegations the software giant has too much market power in the cloud-computing-services market. Intercontinental Exchange fell after it announced it agreed to acquire Black Knight, a software, data and analytics company that serves the mortgage industry, for US$13.1 billion in cash and stock. While the deal will likely take over a year to receive regulatory approval, in our view, it will be a positive transaction for the group as it digitalises the mortgage market.
The biggest contributors were our investments in Reckitt Benckiser, McDonald’s and WEC Energy. The three are defensive and resilient businesses in the deteriorating economic outlook we face. All reported excellent results for the first quarter, beating market expectations and benefiting from strong pricing power and thus pass-through of cost inflation. McDonald’s is also benefiting from the reopening of economies post the peak of covid-19 as patronage returns to its restaurants. WEC Energy, a US utility that supplies electricity and gas to Midwestern states, operates in a supportive regulatory environment and benefited from strong demand for gas during the US winter and growth in its ‘rate base’.
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