Magellan Launches Currency-Hedged Global Infrastructure ETF on ASX
Magellan Asset Management has launched the Magellan Infrastructure Fund (Currency Hedged), an actively managed ETF trading on the ASX under ticker MICH, targeting global listed infrastructure with currency hedging and ESG integration.
- Active ETF investing in 20-40 global infrastructure securities
- Substantial hedging of foreign currency exposure to Australian dollars
- Incorporates ESG factors and excludes controversial industries
- Management fee of 1.05% plus performance and transaction fees
- Liquidity provided via ASX trading and off-market withdrawal options
A New Infrastructure Investment Avenue
Magellan Asset Management Limited has introduced the Magellan Infrastructure Fund (Currency Hedged), an actively managed exchange-traded fund (ETF) now trading on the Australian Securities Exchange (ASX) under the ticker MICH. This fund offers investors exposure to a concentrated portfolio of 20 to 40 global listed infrastructure companies, with a focus on essential assets that underpin community functioning.
The Fund is designed to deliver attractive risk-adjusted returns over the medium to long term, while aiming to reduce the risk of permanent capital loss. Its active management approach allows the team to select securities based on rigorous bottom-up analysis, emphasizing quality companies with sustainable competitive advantages and predictable cash flows.
Currency Hedging and ESG Integration
A key feature of the Fund is its substantial hedging of foreign currency exposure back to Australian dollars. This is achieved primarily through forward foreign exchange contracts, mitigating the impact of currency fluctuations on the Fund’s capital. This currency hedging is particularly relevant given the Fund’s global investment scope.
Magellan also integrates Environmental, Social, and Governance (ESG) factors into its investment process. The Fund excludes companies involved in tobacco, controversial weapons, and nuclear weapons beyond specified thresholds. ESG considerations are embedded in the fundamental research and ongoing stewardship activities, including proxy voting and engagement with portfolio companies.
Fees, Liquidity, and Risks
The Fund charges a management fee of 1.05% per annum, alongside a modest performance fee estimated at 0.06% and transaction costs around 0.05%. Investors can buy and sell Units on the ASX like any listed security, benefiting from daily liquidity. Additionally, off-market withdrawal options are available under certain conditions, such as prolonged trading suspensions.
However, the Fund carries a high-risk profile, reflecting concentration risk from its focused portfolio, market volatility, infrastructure-specific regulatory risks, and residual currency risk despite hedging. Investors should also be mindful of potential divergences between the Fund’s net asset value and its market price on the ASX.
Tax and Regulatory Framework
Structured as an Attribution Managed Investment Trust (AMIT), the Fund has specific tax implications for investors, including the attribution of income and capital gains. Magellan provides detailed tax reporting to assist investors in meeting their obligations. The Fund operates under the ASX AQUA Rules, which differ from standard listing rules, particularly regarding continuous disclosure and corporate governance requirements.
Overall, the Magellan Infrastructure Fund (Currency Hedged) presents a compelling option for investors seeking global infrastructure exposure with active management, currency risk mitigation, and a strong ESG focus, albeit with a high tolerance for risk and a long investment horizon of seven to ten years.
Bottom Line?
As infrastructure investing evolves, Magellan’s new ETF blends active management with currency hedging and ESG rigor, setting a benchmark for global infrastructure funds on the ASX.
Questions in the middle?
- How will the Fund’s active management strategy perform relative to benchmark indices over time?
- What impact will currency hedging have on returns during periods of significant foreign exchange volatility?
- How effectively can the Fund maintain liquidity and narrow spreads given its concentrated portfolio and AQUA Rules listing?
