Both technically right... It wont dilute the NAV due to Magellan paying for the proposed discount to NAV... but it may drive the share price lower given the market dynamics of more shares on issue. That is, more units on issue could reduce the current premium buyers are willing to pay to acquire units. Supply and demand....You can't have it both ways. Hopefully they can maintain the current premium...
Nevertheless the proposal seems generous and far more appealing than any other offer put forward by a closed investment vehicle in recent times. I know people like to laugh about Magellan being an ultra expensive ETF, but they certainly lead the way in their creative offerings.
The 5% discount will have a lot of current investors taking up the offer. Especially when you then factor in the premium to NAV...
I am quite fond of the LIT structure, which combines the benefits of a regular income stream whilst restricting inflows/outflows that plague managed funds.
Compared to other markets, Australia has far less LIT structures. I think this will change given the appetite Aussies generally have towards high yield stocks and investment options. At the moment, it seems like Magellan are leading the way.
More than happy with the performance thus far... although I did invest in L1 Long Short Fund... anything seems amazing compared to that dud.
MGG Price at posting:
$1.63 Sentiment: Buy Disclosure: Held
