Chris Wheldon is a portfolio manager for the Magellan High Conviction Fund, which is soon to be listed as a trust on the ASX. Chris speaks to Industry Moves about the firm's investment process, the trust's benefits to investors, and how it best fits within a portfolio. He also shares the story of his journey into funds management and why losing a little 'hard earned' capital as a teenager reaped its own rewards.
Chris Wheldon is a portfolio manager for the Magellan High Conviction Fund, which is soon to be listed as a trust on the ASX. Chris speaks to Industry Moves about the firm's investment process, the trust's benefits to investors, and how it best fits within a portfolio. He also shares the story of his journey into funds management and why losing a little 'hard earned' capital as a teenager reaped its own rewards.
We are agnostic to listed or unlisted products. We recognise there is demand for both structures and try to provide both options when we think there is demand. Since inception the strategy has developed a strong six-year performance record and launching the trust allows those investors who prefer a listed option to access it on the ASX.
We don't pay commissions or fees on unlisted products and we wanted to align this stance across our product suite.
The high conviction strategy is most suited to investors that seek higher absolute returns over the long term and that understand short-term price volatility, plus those seeking a concentrated exposure to Magellan's 'best ideas' as a complement to a more diversified portfolio.
We construct a concentrated portfolio of outstanding and undervalued businesses with the objective of delivering attractive absolute returns by owning these businesses for the long term.
Magellan's investment process marries deep understanding of the world's highest-quality businesses with macroeconomic insights and rigorous risk discipline. We construct a concentrated portfolio of outstanding and undervalued businesses with the objective of delivering attractive absolute returns by owning these businesses for the long term. Investments in the strategy are selected on this basis. We have risk controls in place to avoid excess aggregation to any particular factor and to preserve capital.
We have typically seen this product added as part of a core-satellite approach to portfolio construction where this strategy has been added as an option in the satellite component that seeks high absolute returns.
"We also ensure that even with a concentrated portfolio there is meaningful diversity in terms of the underlying sectors, geographies, growth drivers, threats and so on.
The trust is designed to generate absolute returns but with risk controls in place to avoid aggregation risks and to preserve capital. The most important risk control is that Magellan's detailed fundamental research seeks to find companies that are less likely to suffer a permanent loss of shareholder value. We deliberately screen out of our universe low-quality businesses possessing poor economics - we don't find these investments attractive even if they appear 'cheap'. We also ensure that even with a concentrated portfolio there is meaningful diversity in terms of the underlying sectors, geographies, growth drivers, threats and so on.
And a little about you Chris...
I made my first investment as a teenager. The best thing that happened from this experience is that I lost some of my hard-earned capital. This caused me to reflect and read widely. This reading led to Ben Graham and Phil Fisher, which led to Warren Buffett and Charlie Munger, which led to a meeting with Hamish in an Omaha hotel lobby in May 2007 while we were attending the Berkshire Hathaway shareholder's meeting.
Frankly, everything. This role varies from going into incredibly deep detail on a company to zooming out and considering the relative merits of different companies and how they can be combined in a sensible portfolio. It combines quantitative analysis with qualitative understanding of competitive strategy and psychology. Plus, I get to work with an incredible team of good and talented people at Magellan.
Capital compounds. So does goodwill.