Ann: MGF Fund Update - February 2021, page-181

Some great discussion here. Thanks for your informative posts FireStorM, harrynoodle, and cutty.

On the possible transitioning of MGF to an open-ended Active ETF, it should be noted that Magellan Global Fund already provides investors this option with MGOC. As I understand it MFF does not provide this option.

There are many reasons why a LIC or LIT trade at a discount. It has been 7 months since the restructure and share buyback commenced, yet the discount stubbornly remains. Buying back stock reduces size and with it reduced economies of scale in terms of costs. Magellan Managed Funds are not immune from the trend to ETF’s, with 60% of LIC’s now trading at a discount to NTA. It is not surprising that Geoff Wilson has launched WAR with its discount capture strategy. He has been very successful with GVF (I am a holder) which has the same strategy.

The performance of MGF since the restructure has been disappointing and could be a contributing factor with investors seeking to exit an underperforming asset. This can exacerbate underperformance. Magellan’s investment objectives of capital preservation have worked against them in recent times, holding higher levels of cash when the market was recovering strongly. They have also been highly convicted to Internet & eCommerce and Information Technology stocks which have been out of favour. It is worth noting that MGF and MHH have similar top holdings and both trading at substantial discount to NTA. MGF’s holdings in Tencent and Alibaba comprise ~10% of portfolio which may also be weighing on performance and the increasing crackdown by CCP isn’t helpful to those stocks’ performance. Without any commentary from Management, we are left to do our own research on the reasons behind the underperformance. The lack of communication, which is key to keeping investors informed, is very telling.