Response from MHH for those interested.
Thanks for your email about MHH.
MHH is a closed-ended Listed Investment Trust that has both a share price (currently $1.52) and a Net Asset Value (currently $1.59). Being a closed-ended Listed Investment Trusts, the fund has a fixed number of units on issue. The only way to buy these units is to buy them from another investor in the market (ie, the fund does not create new units like an open-ended fund). What this means is that the two people transacting actually set the share price based on what each person is willing to buy and sell at. If someone wants to pay higher than the Net Asset Value (NAV), then it will trade at a premium and obviously, if someone wants to pay less than the NAV, then it is trading at a discount. So, the underlying reason for both discounts and premiums is purely investor sentiment and nothing to do with the underlying investments in the fund.
To overcome these attributes of closed ended funds, we have standing on market buy backs for MHH, which enables the fund itself to buy back units on the market. It in effect becomes another buyer and as such this can mean that discounts can be reduced, but this is done in a measured way (ie, we don’t go do a large buy back which increases the share price only to have it disappear the next day!). By doing these buy backs, it actually shrinks the fund, so it’s actually not in our interest to do buy backs, but it is in the interest of investors in the funds. We also update the Net Asset Value every second on our website, so the market is fully informed as to what one unit is worth, which should help investors know what to sell it for and therefore minimise discounts that way. This can be found here:
https://www.magellangroup.com.au/funds/magellan-high-conviction-trust-asx-mhh/
As per your comment, with this level of transparency regarding the Net Asset Value, you would expect that it should trade closer to the Net Asset Value, given that the market is fully informed about its value. However, given that investors in the market set the share price, then we can only surmise that it could be investor's lack of understanding of this.
If the discount is an issue for you, then we also offer the exact same fund as an unlisted managed fund, the Magellan High Conviction Fund. The underlying assets are the same and the fees are identical (for the Class A units). Information on this fund can be found here on our website:
https://www.magellangroup.com.au/funds/magellan-high-conviction-fund/
In relation to your question about when Chris and Hamish may deploy cash, please have a look at a recent webinar the Chris did on the strategy here:
If you have any further questions, please feel free to let me know.
(20min delay)