The Magellan High Conviction Trust (ASX: MHH) share price is up around 8% after announcing an important change to its structure.
Magellan High Conviction Trust intends to transition to an ETF
It was announced that Magellan High Conviction Trust intends to transition from a closed-ended listed investment trust to an open-ended active exchange-traded fund (ETF).
If the transition is implemented, which requires unitholder and regulatory approvals, unitholders will be able to apply for and redeem units directly with Magellan Financial Group Ltd (ASX: MFG) and will also have the ability to buy and sell units on the ASX generally at a tight spread to net asset value.
The CEO and Magellan, Brett Cairns, said:
Magellan is continuously focused on ways to improve the experience of investors in our funds. On balance, we believe the benefits for unitholders of reducing the trading discount in MHH outweighs the benefits of MHH remaining as a closed-ended fund. We believe transitioning the fund to an open-ended active ETF is in the best interests of investors as it will allow direct access to the fund for applications and redemptions and see the units in the fund trade at a tight spread to net asset value going forward.
How big was the discount of the Magellan High Conviction Trust share price?
Yesterday, the Magellan High Conviction Trust share price ended the day at $1.57. The estimated net asset value per unit was $1.77 yesterday, translating to a discount of 11.3%.
Its current indicative NAV is $1.737, so the NAV has fallen since yesterday. But the share price is now $1.66.
Portfolio details and performance
At the end of May 2021, it said that its net performance was 11.8% over the prior 12 months and it has achieved 9% per annum since inception in October 2019.
Magellan said that its top five holdings in alphabetical order were: Alphabet Inc, Facebook Inc, Microsoft Corporation, Netflix Inc and Tencent Holdings.
In terms of diversification, Magellan showed how the portfolio was split between sectors and geographically.
Over half of the portfolio derives revenue from internet and e-commerce sources, 22% is from IT, 6% from payments, 7% from financials, 6% from restaurants and 4% is cash.
Looking at the geographical exposure, 39% of revenue came from the US, 16% from Western Europe, 18% from China, 13% from emerging markets (excluding China), 10% from the rest of the world and 4% of the portfolio is in cash.
