Is this the best option for income and growth on the ASX?

There are few investors out there who have performed as well as Magellan Financial Group Ltd (ASX: MFG) since the GFC.

Hamish Douglass has led Magellan to be one of the most consistent outperformers of its global benchmark.

Magellan Global Trust (ASX: MGG) is a listed investment trust (LIT) which offers an almost identical strategy as the unlisted Magellan fund.

It invests in what it thinks are the highest quality businesses in the world, offering good diversification away from Australian-based businesses.

Some of its top holdings include Alphabet (Google), Facebook, HCA Healthcare, Starbucks, Apple, Visa, Lowe’s, Kraft Heinz, MasterCard and Oracle.

I also like that Magellan Global Trust keeps a good percentage of its portfolio in cash. At the end of September 2018, 20% of the portfolio was cash. This is good for protection against market crashes and also to pick up opportunities when they arise.

To me, it seems like some of its investment choices are more defensive than the global index on average and some are more growth-orientated. The way the portfolio has been constructed could allow Magellan to outperform when the market is going well or when it’s falling.

Over the past six months it has outperformed the MSCI World Net Total Return Index (AUD) by 0.9% after all fees and expenses. Since inception almost a year ago it has returned 19.9% after all fees, outperforming its global benchmark by 1.2%.

All of the above relates to why its net portfolio performance is compelling. As for income, it aims to pay an annual 4% distribution yield, paid every six months.

Foolish takeaway

Magellan Global Trust is currently trading at a slight discount to its current indicative net asset value (NAV) per share of $1.69. I think Magellan Global Trust offers a good source of income plus long-term capital growth potential.

I’d be happy to buy a small parcel at today’s price, however it would only be a small parcel for now because US shares could face a turbulent time due to rising interest rates and China, which may make the share price fall to a more attractive number.

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Motley Fool contributor Tristan Harrison owns shares of MAGLOBTRST UNITS. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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