I have read the new Magellan Listed Investment Trust prospectus and it is really just a bizarre structured product and not an equities fund at all (?).
There is a lot of fine print that a lot of investors won't fully understand unless a tax adviser explains it to them.
Magellan promise a fixed "target" annual distribution yield that are unrelated to the underlying fund performance.
If the annual return is greater than their target distribution yield of 4%, the investor only gets 4% with the rest compulsorily reinvested in the fund (to the benefit of the Manager who then gets more fees on the extra FUM). The poor investor pays tax on the full return not just the 4% distributed. This means that, perversely in really good performance years investors may actually pay more tax than they receive in distributions.
On the other hand, if the annual return is less than 4%, the investors will be given a capital return. This means the fund will hand some of the investors own money BUT the poor investor will still have to pay extra tax on it!!!
Sounds like a poor investment to me....
Be cautious....!!!!
MFG Price at posting:
$24.55 Sentiment: Sell Disclosure: Not Held
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