Investor Education

What is a listed investment trust?

What is a Listed Investment Trust?

A listed investment trust or LIT, is a closed-ended, managed fund whose units trade on a stock exchange, such as the ASX, just like an ordinary listed security.

A Listed Investment Trust has an investment team and a portfolio manager who actively selects the underlying stocks or shares that go into the LIT. They undertake deep research into those stocks to determine their position in the portfolio and take into account things like the state of the economy and other factors that could impact the overall performance of the LIT.

Similar to a company listed on the ASX, a Listed Investment Trust has a fixed number of securities on issue at any one time. This makes it a ‘closed ended’ fund and, unlike an open-ended fund, cannot continuously issue new units or redeem existing units. A Listed Investment Trust can only issue new units through a placement, rights issue, dividend reinvestment plan, unit purchase plan or through a takeover of another trust using its own units.

Being a closed ended fund, a Listed Investment Trust can trade at a premium or discount to its Net Asset Value. With the aim of preventing the trading price from falling materially below the LIT’s net asset value per unit, Magellan has put in place several structural processes:

The first is transparency around value: The net asset value of the Listed Investment Trust is disclosed on the ASX and the Magellan website and is updated every 15 seconds using the intraday indicative Net Asset Value or iNAV. The next is scale: Magellan created a Listed Investment Trust of scale, which aims to provide an orderly market of buyers and sellers. And finally, there is a standing buyback programme that has been put in place to allow the Listed Investment Trust to buy back its own units if the ASX share price trades at a meaningful discount to the Net Asset Value per unit.

Magellan has one Listed Investment Trust, the Magellan Global Trust (MGG), which gives investors access to a portfolio of actively managed global stocks with active currency hedging and target cash distribution of 4% pa paid semi-annually. Magellan provides investors with monthly fund fact sheets and discloses the full portfolio on a quarterly basis. There is no paperwork – all that is needed is online share trading account or an account with a stockbroker.

To understand how a Listed Investment Trust works, it’s important to understand some terminology that is used in reference to listed products. Please click on our other videos to learn more.

Important Information: Units in the fund(s) referred to herein are issued by Magellan Asset Management Limited ABN 31 120 593 946, AFS Licence No. 304 301 (‘Magellan’). This material is issued by Magellan and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation. This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should read and consider any relevant offer documentation applicable to any investment product or service and consider obtaining professional investment advice tailored to your specific circumstances before making any investment decision. A copy of the relevant PDS relating to a Magellan financial product or service may be obtained by calling +61 2 9235 4888 or by visiting www.magellangroup.com.au.

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