Ann: Funds Under Management - October 2021, page-39

It's worth keeping in mind that Magellan is recommended for multiple reasons and not solely performance.

• Magellan aims for 9% pa net of fees. They are not aiming to generate the highest possible out-performance. This target structurally limits the upper end of potential returns when compared with funds that seek the highest possible return regardless of the risk taken. Magellan will sacrifice some upside to lock in a 9% pa return.
• The last 10 years have seen ridiculously high returns from global share markets - this will not always be the case. Magellan has marginally out-performed over 10 years but this was during a period where global share markets generated 16% pa returns. Magellan's strategy has a substantially higher chance of out-performing during 10 year periods when share markets generate 5-7% returns.
• Lonsec currently forecasts long-term market returns for global equities (unhedged) at 5.3% pre-tax. This is due to global share markets trading a high valuations whilst faced with structural head-winds in the coming years (rising interest rates etc.). Within this context, if Magellan generates 9% pa net returns then they will generate substantial out-performance. Magellan's best years may lie ahead.
• Magellan has a demonstrated track record of out-performing during market downturns - capturing just 45.3% of downside.

Financial Advisers and institutions will appreciate the overall benefits that Magellan's strategy provides - it is about more than returns. Magellan's strategy is a compounding machine with a higher probability of success. This is why they will remain an important component of institutional and financial adviser's portfolios moving forward.

Note: This is not financial advice. You must seek your own financial advice from a qualified financial adviser.