Magellan High Conviction Performance Review | News

What is the Magellan High Conviction fund?

Magellan High Conviction Fund’s objectives are to achieve attractive risk-adjusted returns over the medium to long-term. The Fund offers investors an opportunity to invest in a high conviction global equity fund.

Invest in companies that have sustainable competitive advantages which translate into returns on capital in excess of their cost of capital for a sustained period of time.
The portfolio will comprise 8 to 12 investments.
Applies fundamental bottom-up approach to seek companies with sustainable competitive advantages that can grow more quickly than the overall economy.
Unlike the flagship fund, the High Conviction strategy doesn’t have strict limits on aggregate portfolio beta, but instead uses cash (up to 50%) to manage drawdown risk.

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Latest News & Updates For Magellan High Conviction

Magellan High Conviction Fund Commentary September 30, 2023

After a strong start to the quarter, weakness in September saw the Fund finish slightly down.

Top contributors to the porfolio in the September quarter were Booking Holdings, Alphabet and Safran. Booking reported a strong second-quarter result where it demonstrated continued progress on direct bookings, performance marketing efficiencies and North American market share. Growth and sentiment were also bolstered by resilient travel demand in Europe. Alphabet reported solid second-quarter results demonstrating stable trends in advertising and continued cost control. Concerns of Search disruption from AI /ChatGPT continued to ease as Alphabet demonstrated its product innovation. Safran reported better-than-expected secondquarter results and raised its full-year 2023 guidance on the back of a faster-than-expected traffic recovery. It also initiated a share buyback.

Yum! Brands, Microsoft and Chipotle Mexican Grill were the largest detractors from the portfolio this quarter. The Yum! Brands share price has been affected by broader weakness in consumer defensive stocks and concerns about a stalled economic recovery in China. This is despite a strong 2Q23 result that included accelerating store roll-out activity and strong momentum in other international markets. Chipotle’s share price fell this quarter after the company gave near-term guidance that disappointed elevated market expectations, reflecting moderating inflation-driven price increases and some temporary impacts from higher avocado and beef costs on restaurant margins. Microsoft delivered good final-quarter (to 30 June) results but the widespread optimism around Azure’s growth inflecting higher (and perhaps some excessive) exuberance around the near-term benefits it will reap from generative AI was not met by the guidance as we lap the optimisation cycle.

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Product Snapshot

Product Overview
Performance Review
Peer Comparison
Product Details

Product Overview

Fund Name	APIR Code ? A Product Code is unique a identifier code issued by a group or governing body, to reference products in a large group. For an example, APIR codes are commonly used for Funds and Ticker codes are commonly used for Securities such as ETFs and Stocks.	Structure ?	Asset Class ? An Asset Class breakdown provides the percentages of core asset classes found within a mutual fund, exchange-traded fund, or another portfolio. Asset classes (in microeconomics and beyond) generally refer to broad categories such as equities, fixed income, and commodities.	Asset Category ? An Asset Category is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset categories (or a sub-asset class) are made up of instruments which often behave similarly to one another in the marketplace, looking down to the Asset Category level is important if looking to build a diversified portfolio.	Peer Benchmark Name ? A Peer Index (benchmark) refers to a peer group of investment managers who have the same investment style or category. It is used to compare the performance of one manager to their peer group, which makes it simpler for investors to choose between the vast number of investment managers.	Broad Market Index ? A Market Index (benchmark) refers to a hypothetical portfolio of investments that represents a segment, asset or category of an investable market. Market Indices are used to benchmark managers performance, to assist their style reliability and ability to provide excess returns.	FUM ? Funds/Assets under management (AUM) is the total market value of the investments that a person or entity manages on behalf of clients. Assets under management definitions and formulas vary by company.	Management Fee ? A management fee is a charge levied by an investment manager for managing an investment fund. The management fee is intended to compensate the managers for their time and expertise for selecting finanical products and managing the portfolio.	Performance Fee ? A performance fee is a payment made to an investment manager for generating positive returns. This is as opposed to a management fee, which is charged without regard to returns. A performance fee can be calculated many ways. Most common is as a percentage of investment profits, often both realized and unrealized. It is largely a feature of the hedge fund industry, where performance fees have made many hedge fund managers among the wealthiest people in the world.	Spread ? A spread can have several meanings in finance. Basically, however, they all refer to the difference between two prices, rates or yields. In one of the most common definitions, the spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity. This is known as a bid-ask spread.
Magellan High Conviction	MGE0005AU	Managed Funds	Foreign Equity	Large Blend - Specialised	Foreign Equity - Large Specialised Index	Developed -World Index	707.59 M	1.5%	10.00%	0.14%

Performance Review

Fund Name	Last Month ? Returns after fees in the most recent (last) month).	3 Months Return ? Returns after fees in the most recent 3 months.	1 Year Return ? Trailing 12 month returns.	3 Years Average Return ? Average Annual returns from the last 3 years.	Since Inc. Average Return ? Average (annualised) returns since inception	1 Year Std. Dev. (Annual) ? The standard deviation (or annual volatility) of the last 12 months.	3 Years Std. Dev. (Annual) ? The average standard deviation (or annual volatility) from the last 3 years.	Since Inc. Std. Dev. (Annual) ? The average standard deviation (or annual volatility) since the fund inception.	1 Year Max Drawdown ? The maximum drawdown in the last 12 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.	3 Year Max Drawdown ? The maximum drawdown in the last 36 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.	Since Inc. Max Drawdown ? The maximum drawdown since inception - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Magellan High Conviction	0.38%	0.25%	24.61%	4.68%	11.96%	10.16%	15.15%	12.34%	-3.6%	-27.97%	-27.99%

Peer Comparison

Fund Name	Peer Index Name ? A group of individuals who share similar characteristics and interests are called peer groups. Peer group analysis is an essential part of assessing a price for a particular stock in investment research. The emphasis here is on making a comparison, meaning that the peer group constituents should be more or less identical to the company being examined, especially in terms of their main business and market capitalization areas.	12 Months Excess Return ? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.	Excess Return Annualised Since Inception ? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.	12 Months Alpha ? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over 12 months. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.	Alpha Annualised Since Inception ? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market annualized since inception. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.	12 Months Beta ? Rolling 12Month Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).	Beta Annualised Since Inception ? Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).	12 Months Tracking Error ? 12Month Tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark over the last 12 months. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.	Tracking Error Since Inception ? Since Inception tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark since inception. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.	12 Months Correlation ? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.	Correlation Since Inception ? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Magellan High Conviction	Foreign Equity - Large Specialised Index	2.15%	-0.16%	NA%	NA%	NA%	1.03	3.88%	5.52%	0.93	0.9

Product Details

Fund Name	Verifed by SMSF Mates	Manager Address	Phone	Website	Email
Magellan High Conviction	Yes		-	https://www.pendalgroup.com/	-

Product Due Diligence

What is Magellan High Conviction

Magellan High Conviction is an Managed Funds investment product that is benchmarked against Developed -World Index and sits inside the Foreign Equity - Large Specialised Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Magellan High Conviction has Assets Under Management of 707.59 M with a management fee of 1.5%, a performance fee of 10.00% and a buy/sell spread fee of 0.14%.

How has the investment product performed recently?

The recent investment performance of the investment product shows that the Magellan High Conviction has returned 0.38% in the last month. The previous three years have returned 4.68% annualised and 12.34% each year since inception, which is when the Magellan High Conviction first started.

How is risk measured in this investment product?

There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Magellan High Conviction first started, the Sharpe ratio is NA with an annualised volatility of 12.34%. The maximum drawdown of the investment product in the last 12 months is -3.6% and -27.99% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.

What is the relative performance of the investment product?

Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Magellan High Conviction has a 12-month excess return when compared to the Foreign Equity - Large Specialised Index of 2.15% and -0.16% since inception.

Does the investment product produce Alpha over its Peers?

Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Magellan High Conviction has produced Alpha over the Foreign Equity - Large Specialised Index of NA% in the last 12 months and NA% since inception.

What are similar investment products?

For a full list of investment products in the Foreign Equity - Large Specialised Index category, you can click here for the Peer Investment Report.

What level of diversification will Magellan High Conviction provide?

Magellan High Conviction has a correlation coefficient of 0.9 and a beta of 1.03 when compared to the Foreign Equity - Large Specialised Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.

How do I compare the investment product with its peers?

For a full quantitative report on Magellan High Conviction and its peer investments, you can click here for the Peer Investment Report.

How do I compare the Magellan High Conviction with the Developed -World Index?

For a full quantitative report on Magellan High Conviction compared to the Developed -World Index, you can click here.

Can I sort and compare the Magellan High Conviction to do my own analysis?

To sort and compare the Magellan High Conviction financial metrics, please refer to the table above.

Has the Magellan High Conviction been independently verified by SMSF Mate?

This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.

How can I invest in Magellan High Conviction?

If you or your self managed super fund would like to invest in the Magellan High Conviction please contact via phone or via email .

How do I get in contact with the Magellan High Conviction?

If you would like to get in contact with the Magellan High Conviction manager, please call .

Comments from SMSF Mates

SMSF Mate does not receive commissions or kickbacks from the Magellan High Conviction. All data and commentary for this fund is provided free of charge for our readers general information.

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Historical Performance Commentary

Performance Commentary - June 30, 2023

A concentrated portfolio of 10-20 high quality companies meaningfully diversified in risk exposure and correlations seeking to achieve strong risk-adjusted, not benchmark-relative returns.

Cash and cash equivalents exposure between 0 – 50%. The Fund may, from time to time, hedge some or all of the capital component of the foreign currency exposure of the Fund arising from investments in overseas markets back to Australian Dollars.

Performance Commentary - April 30, 2023

A concentrated portfolio of 10-20 high quality companies meaningfully diversified in risk exposure and correlations seeking to achieve strong risk-adjusted, not benchmark-relative returns.

Typical cash and cash equivalents exposure between 0 – 50%.

Performance Commentary - March 31, 2023

The portfolio rose over 10% during the March quarter with our holdings in Booking, Microsoft, Alphabet, Chipotle and Amazon leading the way higher. Each of these rose by over 20% in the quarter except Alphabet, which rose by 15%. The significant events of the start of 2023, particularly the banking crisis, has accelerated the pricing of peak rates and recession fears. The portfolio held no exposure to banks and benefited from this.

The lessening of risk to higher long-term bonds and concerns of greater economic slowdown have seen the backdrop move strongly in favour of the characteristics we seek for the High Conviction strategy.

In addition, the long-term total addressable market opportunity that we believe is evident for many of our holdings came back into focus as OpenAI launched ChatGPT to the public, acquiring 100m users in just eight days. Artificial intelligence is not a new phenomenon with about 20 large foundational models in existence, including Microsoft, DeepMind, Meta, Nvidia, and the Allen Institute. OpenAI’s ChatGPT brought a user interface that did several things; it presented a conversational logic that follows on and has contextual linking; it did not dump blocks of text answers but instead typed out answers word by word, giving the appearance of a person responding; and it was made open to the public.

Microsoft, already an investor in OpenAI, moved swiftly to invest a further $10B and lock up future ownership optionality. It has since added CoPilot to several products and rolled out the new Bing. The opportunity for commercial gains across its business from AI have become increasingly evident to investors.

Initially Alphabet struggled as investors worried Microsoft had ‘stolen a march’ on it and Bing would take search share from Google (and Alphabet bungled the initial showcase of its AI). We believe Alphabet has a strong position in advertising and Cloud that it can commercialise successfully, and this is not a two-horse race to be won by one. Alphabet, Microsoft and Amazon are also all facing near-term headwinds as Cloud spend is optimised by their clients and this has forced a meaningful reduction of headcount and other costs to be undertaken. We expect the very near-term quarterly results will remain soft as they each work through the rectification of overbuilt cost structures and instil greater discipline, but we consider this will ensure

Performance Commentary - January 31, 2023

Performance Commentary - December 31, 2022

The Magellan High Conviction strategy rose slightly for the quarter. The biggest positive contributions came from the investments in Visa, Intercontinental Exchange and Yum! Brands. All three have shown persistent resilience through recent months and Visa and Yum! both benefit from the current high inflation environment. ICE is delivering strong results and benefiting from current market conditions while the prospective merger with Black Knight awaits regulatory approval. Booking Holdings and Safran also contributed strongly as the improving global travel trends continued.

The biggest detractor in local-currency terms in the quarter was the 25.9% fall in Amazon, as it has found itself on the wrong side of excess demand driven by pandemic stimulus and ultra-low interest rates that is now unwinding. This has seen sizeable cuts to expectations for both its retail and AWS businesses and implementation of major cost cutting and capex reductions to right size its operations. We believe Amazon will ultimately come out of this cycle stronger and better focused and will remain a leading player in its core exposures across cloud infrastructure, ecommerce and, increasingly, advertising. The other main detractors were Alphabet and Meta Platforms, for similar reasons to Amazon; overspend on costs and capex into material revenue slowdowns from stimulus-fueled strength. We exited Meta Platforms during the quarter as part of a general reposition to reduce correlated technology sector exposure and diversify our end market exposures.

Performance Commentary - September 30, 2022

The portfolio recorded a negative return for the quarter. The biggest detractors in local-currency terms were the strategy’s holdings in Microsoft, Alphabet and Visa. The trio slid mainly because they are proxies for economic activity: Microsoft for business IT investment; Alphabet, the owner of Google, for advertising; and Visa for consumer spending. A further blow for Microsoft was that its US$69 billion purchase of computer games developer Activision Blizzard faces a probe by the UK regulators over whether or not it could hamper competition.

The biggest contributors included the investments in Netflix and Amazon.com. Netflix gained after the streaming TV leader reported it lost a fewer-than-expected 970,000 subscribers in the second quarter and the company announced it will partner with Microsoft on its new ad-supported tier. Amazon rose after reporting second-quarter revenue that beat estimates and predicted sales could rise 17% in the current quarter thanks to third-party selling and sustained growth in its AWS cloud division.

Index movements are in local currency. US GDP statistics come from the US Department of Commerce, while US employment and inflation statistics are published by the US Department of Labor. EU economic statistics come from Eurostat. UK statistics are released by the Office for National Statistics. Japanese economic statistics come from the Ministry of Economy, Trade and Industry, the Ministry of Finance and the Ministry of Foreign Affairs (GDP). Australian economic statistics are released by the Australia Bureau of Statistics. China’s economic statistics are compiled by the National Bureau of Statistics of China.

Performance Commentary - June 30, 2022

The portfolio recorded a negative return for the quarter. Among the biggest detractors as a rise in government bond yields applied a greater discount to future profits were the investments in Netflix, Amazon and Alphabet. Netflix dived after the streaming service reported an unexpected decline in subscribers during the first quarter, when 200,000 people cancelled their subscriptions. Amazon declined after the online retailer posted its first quarterly loss since 2015 due to rising costs and a write-down on its investment in electric carmaker, Rivian. Alphabet, the parent of Google, dropped after firstquarter revenue growth of 20% disappointed due to poorerthan-expected ad sales in Europe and on YouTube.

No stocks contributed over the quarter.

Magellan High Conviction (MGE0005AU) Report & Performance