The Magellan Global Fund turns 10
Over the ten years to 30 June 2017, the Magellan Global Fund (the Fund) has returned 11.04% (net of fees), 6.02% above the performance of the MSCI World Index which returned 5.02% over the same period.
The specialised and focused long-only global equity Fund seeks to invest in a concentrated portfolio of 20 to 40 high quality global companies which are considered to have highly attractive business characteristics at a discount to the assessment of their intrinsic value.
The investment objectives of the Fund are to achieve attractive risk-adjusted returns over the medium to long term, while reducing the risk of permanent capital loss.
Q&A with Hamish Douglass Co-Founder, CEO & CIO at Magellan
- Can you give us a brief history of the Magellan Global Fund (the Fund) from an investment perspective?
Our investment philosophy is based on owning outstanding global companies, purchased at a price that provides a reasonable margin of safety. We take a benchmark-unaware approach and the global portfolio tends to hold only about 25 stocks at any point in time.
It’s interesting that over the past 10 years the global portfolio has only held 63 names in total, a fraction of the number in the MSCI World Index, which exceeds 1,600 stocks. The fact that we have only replaced about four stocks a year in the portfolio shows we are selective and that we hold our investments for the long term.
Our dominant investment themes have changed over the decade due to the changing opportunities available. In the early days, a large theme was the emerging-market consumer, which we accessed via lower-risk multinationals with consumer brands known the world over. Soon after the global financial crisis we anticipated that US housing construction would recover and invested in The Home Depot and Lowe’s, two home-improvement companies that would benefit from that. The shift towards a cashless society led us to buy MasterCard, Visa, eBay and American Express. In recent years, the most important driver of stock selection has been our consideration of network effects around software, platforms and technological advancements. You’ll find Apple, Alphabet, eBay, Facebook, Microsoft and Oracle among our biggest holdings today.
The biggest change that we’ve seen over the last 10 years, is the expansion of our investment team which has grown from 12 people, when the global fund began in 2007, to 36 now.
- Has the philosophy behind the Fund evolved over the past 10 years?
Our investment approach was founded on two principal objectives: to achieve attractive risk-adjusted returns over the medium to long term, and to reduce the risk of permanent capital loss. I would say that the global financial crisis showed the importance of capital preservation. Having capital preservation as a paramount goal ensures that we try to be aware of what could go wrong with any investment that we make or thematic exposure that have.
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