Portfolio of 20 to 40 high-quality global companies with a minimum market capitalisation of US$25 billion that is designed to achieve attractive risk-adjusted returns and preserve capital in adverse markets
To achieve attractive risk-adjusted investment returns over the medium to long term.
To preserve capital and reduce downside volatility.
The Magellan Global Plus Strategy seeks to invest in outstanding companies at attractive prices, while exercising a deep understanding of the macroeconomic environment to manage investment risk.
Magellan perceives outstanding companies to be those that are able to sustainably exploit competitive advantages in order to continually earn returns on capital that are materially in excess of their cost of capital.
While Magellan is extremely focused on fundamental business value, it is not a typical ’value’ investor. The Magellan Global Plus Strategy will invest in companies that have relatively high price-to-earnings and price-to-book multiples, provided that their businesses are outstanding and their shares are trading at an appropriate discount to their assessed intrinsic value. Equities that appear undervalued on the basis of a low price-to-earnings or price-to-book multiples will often prove to be poor investments if the underlying business is fundamentally weak and exhibits poor returns on capital.
Magellan focuses on risk-adjusted returns, rather than benchmark-relative returns. As a result, the Magellan Global Plus Strategy’s investment process is designed to generate an unconstrained, concentrated portfolio of high-quality companies.
Magellan believes that an appropriately structured portfolio of 20 to 40 investments can provide sufficient diversification to ensure that investors are not overly correlated to any single company, industry-specific or macroeconomic risk.
The Magellan Global Plus Strategy’s investment process integrates three key disciplines:
The Magellan Global Plus strategy typically invests in companies with market capitalizations in excess of $US 25 billion.
Intensive bottom-up stock analysis and industry research is undertaken in order to identify outstanding companies. This involves the assessment of potential investments against key quality criteria, as well as assessments of their intrinsic value. Magellan uses a proprietary ranking tool, the Magellan Conviction Scoring Matrix, to rank companies based on these factors. This process enables the portfolio to be weighted towards higher conviction ideas (on a risk-adjusted basis).
Magellan’s detailed macroeconomic analysis is overlayed during portfolio construction, alongside the application of both fixed and dynamic risk limits. This process ensures that the portfolio is not overly exposed to aggregation risk (risk which arises from correlated portfolio positions) or macroeconomic event risk. Macroeconomic event risk can be a significant source of negative returns for investors. Magellan will make significant changes to the portfolio if it believes that macroeconomic events could lead to significant and sustained loss in value for investors. Such events would include a financial crisis, a sustained oil price shock, a global pandemic or a major global conflict.
The Global Plus Strategy is no longer available to new investors.
MFG Asset Management acts as the sub-adviser to the Frontier MFG Global Plus Fund. For more information regarding this fund please contact Frontier Funds.