• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to secondary sidebar
  • Skip to footer
  • Subscribe
  • Twitter
  • RSS Feed

Investment News NZ

Investment News provides financial advisers news stories from the financial industry in New Zealand. Subscribe to our free weekly newsletter.

  • Home
  • News
  • Kiwisaver
  • Subscribe
  • About
  • Advertise
  • Contact
You are here: Home / Investment News / Magellan blazes a new path for ASX-traded funds

Magellan blazes a new path for ASX-traded funds

March 9, 2015

casarotti
Frank Casarotti: Magellan head of distribution

Magellan Asset Management seeded its new-style Exchange Traded Product (ETP), a listed-but-open-ended active global equities fund, with $50 million and enjoyed a net inflow of $13 million from investors on day one. Judging by the response, the fund is set to be emulated by many others.

Magellan started work on the product about 18 months ago with discussions with the Australian Securities and Investments Commission (ASIC).

A problem with ETFs, which are all passive in Australia, was that ASIC required monthly disclosure of holdings, which is no problem for an index manager but a worry for an active one. ASIC agreed to quarterly disclosure, up to two months after the fact. Magellan will actually better this with additional disclosures the same as it does with its traditional global fund, the strategy on which the new ETP is based, which is a quarterly list of top-10 holdings by size and a monthly list of alphabetically ranked top 10.

ASIC also agreed for Magellan to be the market-maker to enable to firm to hold a very tight price spread close to net asset value. Another problem with ETFs is that the market-maker’s interests are at least in-part commercial and they do not have the same vested interest in a tight spread because it may require more risk.

Because it is a global fund – stock ticker MGE – Magellan calculates an ‘indicative NAV’ at 9.30am each day, after overseas news is gathered. When the news is after overseas markets have closed – such as a big corporate action and currency movements – the manager estimates the impact through futures and other indicators to get as close as possible to the true NAV. When the ASX opens at 10am, Magellan makes a market which is updated every 15 seconds. Deutsche Bank acts as the transaction agent.

According to Frank Casarotti, general manager, distribution, MGE should particularly appeal to the broking industry, unadvised SMSF trustees and the platform market. “We think it’s a better solution. It’s more efficient and fairer for investors because it’s based on live valuations. We also didn’t like the potentially illiquid nature of some Listed Investment Companies (LICs) in a crisis. With our fund, the liquidity’s there too.”

LICs, a very traditional product which has been popular with self-directed investors for years, are closed-end funds and sometimes trade at significant variation from the NAV of their underlying portfolio. Also, the fund can only grow through portfolio returns or another capital raising requiring a prospectus. With MGE, the group nets off the trades at the end of the day and either issues new units or redeems, allowing further share purchases when the net trading is positive, as was the case on day one last Wednesday (March 4).

The benefit over the ASX’s mFund initiative last year, which allows applications and redemptions for managed funds through the CHESS broking system, is that there is intra-day trading. This gives investors greater surety of their price.

It is not the ASX’s very first ETP, however. There are now seven but the other six are either passive, by BetaShares, or a bond-based income fund, by Aurora Funds Management. By the end of last week, up to a dozen other managers had made inquiries of the ASX about the new market possibilities through ETPs.

Interestingly, ASIC is concerned that investors don’t confuse MGE with all the ETFs on the market and has requested the firm use the term ‘exchange-quoted managed fund’ (EQMF).

 

* Greg Bright is publisher of Investor Strategy News (Australia)

 

Twitter0
LinkedIn0
Google+0
Facebook0

Read More » Investment News

Recent articles

  • On the industry play-list: four chart-topping regulations for 2021 January 15, 2021
  • ASB investment veteran among five Jarden hires; van Schaardenberg exits Findex January 10, 2021
  • Wholesale disclosure loophole for $750k under question January 10, 2021
  • Bear marks time for last dance as bubble-pop music sounds January 10, 2021
  • UK competition regulator gaffe keeps GBST in play for FNZ January 10, 2021
  • Russell positive on climate change but negative screening could be a no-no January 10, 2021
  • How the world’s biggest funds coped in 2020; NZ Super tops five-year figures January 10, 2021
  • Managers tipped to double tech spend by 2030 January 10, 2021
  • S&P results highlight nine-year run for NZX; value peeks through as 2020 ends January 10, 2021

Primary Sidebar

WEEKLY NEWSLETTER

Sign up here to receive our weekly newsletter.
Learn More »

Most Recent Investment News

David-Boyle

On the industry play-list: four chart-topping regulations for 2021

January 15, 2021

ASB investment veteran among five Jarden hires; van Schaardenberg exits Findex

January 10, 2021

Wholesale disclosure loophole for $750k under question

January 10, 2021

Bear marks time for last dance as bubble-pop music sounds

January 10, 2021

UK competition regulator gaffe keeps GBST in play for FNZ

January 10, 2021

Search by Keyword

Investment News

  • On the industry play-list: four chart-topping regulations for 2021 January 15, 2021
  • ASB investment veteran among five Jarden hires; van Schaardenberg exits Findex January 10, 2021
  • Wholesale disclosure loophole for $750k under question January 10, 2021
  • Bear marks time for last dance as bubble-pop music sounds January 10, 2021
  • UK competition regulator gaffe keeps GBST in play for FNZ January 10, 2021
  • Russell positive on climate change but negative screening could be a no-no January 10, 2021
  • How the world’s biggest funds coped in 2020; NZ Super tops five-year figures January 10, 2021
  • Managers tipped to double tech spend by 2030 January 10, 2021
  • S&P results highlight nine-year run for NZX; value peeks through as 2020 ends January 10, 2021
  • Why 2021 shapes as a big year for governance activism January 10, 2021

Investment News Archive

Most Popular Articles

  • Westpac NZ flags retail advice sale to Forsyth Barr posted on October 19, 2020
  • The horror year in technicolour: free KiwiSaver 13 report released posted on September 30, 2020
  • Flint set to spark platform competition posted on August 17, 2020
  • NZ share-trading splurge could trigger tax alarms… posted on October 5, 2020
  • Four to the core: Smartshares to expand, rearrange and reprice ETFs posted on June 22, 2020
  • Kitset KiwiSaver scheme set to unwrap in spring posted on April 27, 2020
  • Funds eye bargains, self-shoppers hoard cash, KiwiSavers turn conservative posted on March 15, 2020
  • AMP Capital NZ chief quits amid equities exodus offshore posted on August 28, 2020

Sponosored Content

David-Boyle

On the industry play-list: four chart-topping regulations for 2021

David-Boyle

Charge of the lite (advice) brigade

Nathan Field

Pandemic Baby Boom a Bust

Star-date 2020: it’s inflation Jim but not as we know it

Quick-links to Popular News

  • FAP Compliance
  • Coronavirus
  • New Appointments
  • Financial Markets Authority (FMA)
  • Kiwisaver
  • Climate Change
  • Crypto Currency
  • Blockchain
  • Insurance

Secondary Sidebar

Recent News

  • On the industry play-list: four chart-topping regulations for 2021 January 15, 2021
  • ASB investment veteran among five Jarden hires; van Schaardenberg exits Findex January 10, 2021
  • Wholesale disclosure loophole for $750k under question January 10, 2021
  • Bear marks time for last dance as bubble-pop music sounds January 10, 2021
  • UK competition regulator gaffe keeps GBST in play for FNZ January 10, 2021
  • Russell positive on climate change but negative screening could be a no-no January 10, 2021
  • How the world’s biggest funds coped in 2020; NZ Super tops five-year figures January 10, 2021
  • Managers tipped to double tech spend by 2030 January 10, 2021
  • S&P results highlight nine-year run for NZX; value peeks through as 2020 ends January 10, 2021
  • Why 2021 shapes as a big year for governance activism January 10, 2021

Footer

Copyright ©2020 InvestmentNews.co.nz — All Rights Reserved ·— Terms & Conditions