Ferrari: The case for RACE (RACE IM)

Alphinity Investment Management

September 2023

Funds operated by this manager:

Alphinity Australian Share Fund, Alphinity Concentrated Australian Share Fund, Alphinity Global Equity Fund, Alphinity Sustainable Share Fund

Disclaimer
The information on this website is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant Product Disclosure Statement or other offer document and the relevant Target Market Determination (available on the Apply Now page on this website) before making a decision whether to buy or hold a financial product.

Who will benefit from the energy transition?

Magellan Asset Management

September 2023

Net Zero is not a new ambition for governments and companies, with some sectors like utilities focused on this climate risk for quite some time now.  David Costello,  CFA, Portfolio Manager - Energy Transition Strategy discusses the opportunities we see from the energy transition and companies that may benefit from this transition. 

Funds operated by this manager:

Magellan Global Fund (Hedged), Magellan Global Fund (Open Class Units) ASX:MGOC, Magellan High Conviction Fund, Magellan Infrastructure Fund, Magellan Infrastructure Fund (Unhedged), MFG Core Infrastructure Fund

Important Information: 

This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 ('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 obtain and consider the relevant Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') and consider obtaining professional investment advice tailored to your specific circumstances before making a decision about whether to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to a Magellan financial product may be obtained by calling +61 2 9235 4888 or by visiting www.magellangroup.com.au.

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Investing Essentials: Understanding fund fees - price versus value

Bennelong Funds Management

September 2023

While understanding the price of an investment is relatively straightforward, measuring value is more difficult. 

Everyone has a different view of what represents value. Some people are more thrifty and therefore focused on achieving a lower price point. Others are happy to pay more if they believe they'll get better quality.

Value can sometimes be hard to quantify, but when it comes to investing, fees are a good place to start. It's pretty easy to work out if an investor in one fund has obtained a greater return than an investor in a similar product with a different fee. This can give a good comparison of the price paid, provided the calculation is done after the suggested investment time frame.

To effectively decide whether a fund presents good value or not, you need to understand the different types of fees in a fund.

Annual management fee - this should be clear-cut and is easy to compare between two funds.

Management expense ratio (MER) - this represents the management fee plus other fund expenses (such as audit costs). Again, it's usually straightforward to compare the MER of two funds.

Performance fee - this, however, can be more complex. Performance fees rarely encompass the same information and can be structured differently from fund to fund, making them more difficult to compare.

To help understand the interplay between different types of fees, the indirect cost ratio (ICR) can be useful. This represents the overall cost of a fund at a particular point in time, including the MER and any related performance fee that has been paid during a financial year.

The ICR, however, is backwards-looking. It's usually calculated after the end of the financial year, and looks solely at that past financial year. While it's a decent indicator, and certainly a good way to compare two different funds, investors should understand that it doesn't represent what they will pay for the year ahead.

Investors should particularly take into account the performance of the relevant fund during that 12-month period. The ICR may look high, but were returns also strong? Don't dismiss a fund from consideration simply because of a high ICR, without also taking into account what performance has been like - that is, making a comparison on price and not a comparison on the value that has been delivered.

This also relates to the 'active versus passive" management debate. Passive funds often have lower fees on face value. Then again, the levers available to an active manager give them more flexibility in adjusting their exposure to the stocks they hold to take advantage of economic themes in the current environment.

For many investors, it may be the case that a combination of both approaches will serve them best, both in terms of price and value. The important thing is understanding the different fees being paid, what those fees are paying for, and why and when the merits of one approach over the other can be most beneficial.

But in the end, the decision to invest in anything should be made by considering more than just the cost.

For more insights visit www.bennelongfunds.com

Disclaimer

The content contained in this article represents the opinions of the author/s. The author/s may hold either long or short positions in securities of various companies discussed in the article. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely as an avenue for the author/s to express their personal views on investing and for the entertainment of the reader.