Magellan Asset Management is replicating the structure of its innovative ASX-quoted managed fund for its global listed infrastructure fund.
The move, expected to be completed in the first half of 2016, follows the success of the listed Magellan Global Equities Fund, which has grown to $392 million since its launch in March.
The structure, the first of its kind anywhere in the world, addresses the liquidity short-comings of a listed investment company model by allowing the creation and redemption of new units through Magellan's own market-making mechanism. It also provides the benefits of live pricing typically associated with exchange traded funds and, importantly, offers active investment management where ETFs do not.
With fees at 1.35%, the cost of the existing Magellan Global Equities Fund, which replicates the performance of the hugely popular Magellan Global Fund run by Hamish Douglass, is more in line with a typical managed fund than a low cast ETF. The other main difference from an ETF is that portfolio holdings only have to be reported quarterly and with a two-month lag.
Magellan head of infrastructure investments and portfolio manager of the Magellan Infrastructure Fund, Gerald Stack, believes the introducing the new structure to the global listed infrastructure strategy will up it up to a wave of SMSF investors who want the convenience of trading via the exchange and to whom the asset class is particularly well suited.
"We think infrastructure should deliver a real return of around 5-6% over three to five years," he said. "You get very reliable, predictable returns over time with this asset class. It's not get wealthy quick; it's get wealthy slowly but with confidence."
The strategy itself invests in a concentrated portfolio of around 30 listed infrastructure ideas sourced from around the globe. Stack and his team have an emphasis on quality and the universe is screened to rule out companies with high levels of debt, unpredictable cash flow and revenue, and those whose operation can be competed away.
"Assets that meet these requirements provide investors with a highly defensive, inflation-linked exposure that exhibits low correlation with other asset classes," Stack said.
Toll roads and airports, both in Australia and overseas, feature prominently in the portfolio.
The Magellan Infrastructure Fund, around which the new ASX-quoted version will be based, has had a strong 12 months. To the end of November it has outperformed its benchmark UBS Developed Infrastructure and Utilities Net Total Return Index (hedged to AUD) by 13.98%. Since inception in July 2007 it has delivered outperformance of 3.36% per annum versus the benchmark.