Is this ASX share the best way to ride out the share market volatility?

With today being another very volatile day on the ASX and in international share markets, I think Magellan Global Trust (ASX: MGG) could be the best way to ride it out.

Magellan Global Trust is a listed investment trust (LIT) operated by Magellan Financial Group Ltd (ASX: MFG) to invest in international shares.

Indeed, it doesn’t aim for just any international shares, but the highest-quality shares that the Magellan investment team can find.

I think it’s an impressive top holdings list which includes: Alphabet (Google), Apple, Facebook, HCA Healthcare, Kraft Heinz, MasterCard, Microsoft, Oracle, Starbucks and Visa.

It’s the type of portfolio that is growth-focused enough to grow faster than the MSCI World Net Total Return Index (AUD) but it also has defensive qualities to fall less in a correction, particularly with its 20% cash holding in the portfolio.

Over October the index fell 5.4%, yet the net asset value (NAV) of Magellan Global Trust only fell 2.9% after all fees. Over the past year the trust’s net portfolio performance was 13.2% compared to the index’s 9.4% return – an outperformance of 3.8%.

Investors should rightfully seek low management fees – high fees can cripple long-term net returns. However, Magellan Global Trust (and the longer-running unlisted funds of Magellan) has proven that it’s possible to materially outperform despite a fairly high management fee. It’s the highest net return that wins, no matter whether the annual fee is 0.04% or 1.35%.

I also like that Magellan Global Trust seeks to give investors a distribution yield of 4% on the NAV with a 5% discount for distributions that are re-invested. This combination of good total returns with a decent yield means the Magellan Trust can suit almost any portfolio.

Foolish takeaway

Whilst you’re unlikely to see Magellan Global Trust outperform by more than 5% per annum over the long term, a few percentage points of outperformance over 10 years can translate into thousands or tens of thousands of dollars of outperformance.

It’s not a bargain today, but it is trading at a discount of around 1% compared to the intraday indicative NAV per share.

Another share that could outperform the share market in good times or bad times is this very defensive share that may grow profit even quicker in a recession.

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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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