Investor Education

What is liquidity?

What is liquidity?

Liquidity refers to how easy it is to buy or sell a stock or unit on the exchange.

With closed ended fund, such as a Listed Investment Trust, liquidity will depend on both the number of buyers and sellers AS WELL AS the relative demand for the stock or unit. In one scenario, a unit or stock may have a high demand but low liquidity if buyers and sellers disagree on the value. Without agreeing on a price, there’s no transaction. Alternatively, everyone may agree on the price of stock or unit, but there may be few buyers or sellers in the market. Both these situations can lead to low liquidity for closed ended products.

With Magellan’s Listed Investment Trust, we created a trust of scale, with over 34,000 unit holders in the trust as at March 2019. This aims to provide an orderly market of buyers and sellers.

With an open ended fund, such as a Magellan Active ETF, liquidity can be provided by the fund itself as investors can buy and sell units to and from the fund. With some other open ended funds, liquidity is provided by authorised market participants, known as ‘market makers’, rather than the fund itself. This means that regardless of demand, there will be liquidity and the ability to buy and sell units with ease in Active ETFs.

Important Information: This material has been delivered to you to provide information regarding Magellan Asset Management Limited (‘Magellan’) and has been prepared for general information purposes and must not be construed as investment advice. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer or invitation to purchase, sell or subscribe for in interests in any type of investment product or service. No distribution of this material will be made in any jurisdiction where such distribution is not authorised or is unlawful. This material does not take into account your investment objectives, financial situation or particular needs. 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. This material and the information contained within it may not be reproduced or disclosed, in whole or in part, without the prior written consent of Magellan.

How to invest

  • Magellan offers two market-leading strategies, global equities and global listed infrastructure. Find out how easy it is to invest in the world’s best companies, as chosen by Magellan’s experts.

  • Global equity products

    You buy from the world’s best companies, so why not invest in them? Magellan offers a range of highly-rated global equity funds, containing some the world’s best companies that we believe are positioned to benefit from long-term investment tailwinds.

    Find out why investing in a diversified global fund makes sense.

    Invest in global equities
  • Global listed Infrastructure products

    Infrastructure: Supporting you every minute of every day. Our range of top-rated global listed infrastructure funds are positioned to generate inflation-protected, stable yet solid returns.

    Discover why including listed infrastructure in a diversified portfolio can enhance returns and reduce portfolio risk.

    Invest in global infrastructure