Ann: MGF Fund Update - February 2021, page-276

Cross-posted here to discuss in separate thread as we can't make threads here: https://hotcopper.com.au/threads/sell-mgoc-buy-mgf-make-5-plus.6501314/

Currently due to MFG news (CEO left, Hamish personal life, loss of biggest mandate - see AFR) MGOC holders have a rare opportunity to switch from MGOC (open ended trades at NAV) to MGF (closed ended trading at record 19% discount to NAV).

The portfolio is the same: Microsoft, Alphabet, Facebook/Meta, Netflix, Starbucks, Visa. (High-quality with aim to be less volatile than a global index fund).
https://www.magellangroup.com.au/funds/magellan-global-fund-open-class-asx-mgoc/#class-selector

MGF is trading at $1.675 and NAV is $2.05
MGOC is trading at $2.83 and NAV is $2.84

Of course, if you buy open ended based on sentiment not NAV that's what you exit at too. (Not good if you ever have to sell at whatever the current price is!)

But for people who own MGOC long-term this is a no brainer switch (tax reasons aside):

- Buyback of MGF will defend max discount. Can buy over 100 million shares and bought 1.7m yesterday.

- Most investors and their financial advisors are typically terrible at making sentiment-driven decisions selling after underperformance (e.g. MGF currently) and entering after outperformance (e.g. see Google Peter Lynch's investor returns vs his funds). Smarter to do the opposite.

- For reputational reasons, Magellan won't want to have MGF trade at such extreme discounts and may implement other measures.

- The MGF sister fund MHH was converted to a trust (MHHT) to remove the discount complaints and pressure from investors will point to that solution (I think that's very unlikely for MGF which is much bigger).

- Some of the sellers seem to be confused thinking St James Place or other large mandates operate through MGF so they better rush for the door. Good news, they are separated. MGF is the retail vehicle. Long-term you need to consider the 19% discount vs the asset exposure and holding costs.

> Open Ended vs Closed Ended