Magellan High Conviction – B’s primary objectives are to achieve attractive risk-adjusted returns over the medium to long-term. The Fund primarily invests in the securities of companies listed on stock exchanges around the world, but will also have some exposure to cash. The Fund can use foreign exchange contracts to facilitate settlement of stock purchases and to mitigate currency risk on specific investments within the portfolio. As part of the investment objectives of the Fund, we 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. However, there is no guarantee that any or all of the Fund will be hedged at any point in time.
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.
What is Magellan High Conviction – B Magellan High Conviction – B 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 – B has Assets Under Management of 707.59 M with a management fee of 0.78%, a performance fee of 1.17% 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 – B has returned 0.45% in the last month. The previous three years have returned 5.33% annualised and 13.1% each year since inception, which is when the Magellan High Conviction – B 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 – B first started, the Sharpe ratio is NA with an annualised volatility of 13.1%. The maximum drawdown of the investment product in the last 12 months is -3.98% and -27.66% 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 – B has a 12-month excess return when compared to the Foreign Equity - Large Specialised Index of 2.58% and -0.94% 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 – B 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 – B provide?
Magellan High Conviction – B has a correlation coefficient of 0.9 and a beta of 1.06 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 – B and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Magellan High Conviction – B with the Developed -World Index?
For a full quantitative report on Magellan High Conviction – B compared to the Developed -World Index, you can click here.
Can I sort and compare the Magellan High Conviction – B to do my own analysis?
To sort and compare the Magellan High Conviction – B financial metrics, please refer to the table above.
Has the Magellan High Conviction – B 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.
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Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the Magellan High Conviction – B. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - August 31, 2023 August markets were mainly influenced by the last of earnings results, weak China economic data and an uptick in 10-year bonds; the US 10 Year Bond spiked as high as 4.34% likely partly due to large issuance. Participants seem, even more than usual, unsure of the path for economic growth given the lagged effects of higher policy interest rates juxtaposed with ongoing levels of inflation above target and resilient consumption trends. Energy stocks benefitted from strength in the oil price while utilities struggled as expectations for real interest rates moved higher.
We see increasing evidence of more difficult conditions for consumer exposures (especially discretionary spending) while the opportunities being created by enabling and commercialising AI as well as addressing the capital investment needs of transitioning to a net zero carbon world suggest longer-term support for economic growth, especially in the US. In August, the portfolio rose, benefitting from good underlying company performances and an AUD fall of 3.9%. Price gains were led by Booking, Visa, Amazon, Alphabet and Intercontinental Exchange, which all rose over 5% in the month. Booking is delivering strong results as travel recovers and it is increasingly capturing customers directly via its App. Visa is also benefitting from travel recovery in its cross-border business while Amazon and Alphabet are starting to show the benefits of significant cost and efficiency efforts against strong revenue growth opportunities in part fuelled by AI. Intercontinental Exchange has succeeded in the acquisition of Black Knight, bringing clarity for investors. A couple of stocks had very small price falls but nothing of note in the month. We initiated a position in ASML given share price weakness has opened up a significant margin of safety in this leading exposure to the secular growth in semiconductors. We funded this by taking some profits in Booking.
Performance Commentary - July 31, 2023 The portfolio rose in July. After large positive price moves this year, Chipotle Mexican Grill and Microsoft both fell back during July and were small detractors from performance in the month. Neither of these moves concern us and both companies reported excellent 2Q23 results in July. The largest contributions came from Booking and Alphabet, both up ~10% in July. Salesforce also rose nicely during July. Alphabet reported reassuring results during July as it points to strong investments to capitalise on Generative AI and ongoing costs improvements. Booking is leveraged to the rebounding of travel spending and with increasing availability of flights and the strength of travel in Europe, it is well positioned to capitalise. No new stocks were added in the month. Over the past six months, markets have generally been strong as economic data continues to show resilience, inflation comes down and financial system risks are less in focus while the expansion of ‘net zero’ targeting investments and Generative AI investments deliver new opportunities for investors.
The High Conviction strategy has performed well over this period and is positioned to capture the outsized long term growth opportunities across many varied vectors through those companies we see as most advantaged in their industries. While some noise around inflation and rates is to be expected as we close out 2023, we do see a backdrop that will support the fundamental valuation opportunities in our portfolio.
Performance Commentary - March 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.
Performance Commentary - December 31, 2021 The portfolio recorded a positive return in the quarter. The biggest contributors included the investments in Microsoft and Intercontinental Exchange. Microsoft surged on a 22% jump in revenue for the third quarter as its cloud business benefited from the global shift to remote work. Intercontinental Exchange rose as energy derivative volumes climbed on the back of rising energy price volatility.
The biggest detractors were the investments in Alibaba Group and Meta Platforms. Alibaba dropped after the Chinese tech company announced sales figures that disappointed for a second straight quarter and lowered its fiscal outlook for 2022, which fanned concerns about slowing consumer spending in China. Still, Alibaba announced a 29% rise in revenue for the September quarter and forecast 20% to 23% growth in fiscal 2022 revenue, rather than the 27% analysts were expecting. Meta fell after the renamed Facebook warned revenues in the fourth quarter will be knocked further by Apple’s privacy changes that restrict its ad-targeting, its thirdquarter revenues fell short of expectations on Apple’s restrictions, and the company faced a public-relations blow and possible legal difficulties after a former employee exposed issues at the social-media company and that it was losing younger audiences
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