The discount seems pretty decent considering the time left until the units convert to the open class. From an arb perspective I'd need a way to hedge the market risk from now until they're converted. BBUS stinks for a hold period of anymore than about 3 days so I can't use that. I could hedge it with BEAR (short unlevered ASX futures) but it's an extremely rough and imperfect hedge. I could just go unhedged....

So, they're looking at converting it in calendar Q2 2024, or sometime before June then?

That's exposure to market risk I guess. What other risks are there in holding MGF at the moment? I guess they could change their mind and decide not to?

Where and when is this announcement from? I can't seem to find it.

Cheers

The announcement was back on December 7th @ArrowTrades - see here: Decision-to-proceed-with-Conversion-Proposal.PDF

The discussion about it here started back then, and has just been revived today in light of the discount that is still in the unit price - NAV at 31 Jan 2024 was $2.0947 per unit (see here: MGF-Fund-Update---January-2024.PDF and their unit price closed that day at $2.01, so a discount of 4% to their NAV. However on Feb 9th, their NAV was $2.1969 (see here: Weekly-NAV-12Feb2024.PDF) and their unit price closed the day at $2.03, so a 7.6% discount to NAV.

I still see the discount reducing over time, it has only blown out a little more recently because of the NAV increase in the first fortnight of February.

@Hackofalltrades - There's almost no chance they will change their mind - this conversion is going to happen - it's just a matter of what their NAV is going to be when it does happen. If it stays around $2.19 to $2.20 per unit, or increases between now and then, obviously you're going to come out on top by buying them now at $2.02 to $2.03 and waiting for them to convert and trade at NAV, however that conversion could be as late as towards the end of June, and that's 4 months away, and a lot can happen in 4 months in terms of the value of the companies that MGF invest in (shown below, in alphabetical order). So that's why @PeregrineCapital is talking about hedging the risk with an instrument that is bearish (BBUS/BEAR/etc.) but the issue as they point out is that it's a very imperfect/rough hedge - doesn't align well with the risks in terms of that particular set of companies.

Source: MGF-Fund-Update---January-2024.PDF

Also, it's a managed fund, so we don't know if and when they buy and sell, when companies are added to or sold out of the portfolio; we just get the alphabetical list of their top 10 positions once every month. If the NAV ends up at $1.90 in June, then you will lose money if you sell on the conversion, unless you hold until the NAV comes back up again. That's another way of looking at it - it's not as simple as you get what the NAV is when they convert - you don't have to sell at that point, you can, but you don't have to, you could wait, but that ties up that capital too, instead of being able to use it to make money elsewhere in the market. That's the basic problem with the Arb (arbitrage) strategy of buying now on a decent discount to NAV - personally I don't think anything under 10% is worth the risk, and it's down to around 7.6% now based on their last published NAV on the ASX announcements platform (Weekly-NAV-12Feb2024.PDF) which was  $2.1969 on Feb 9th and MGF units on that day traded between $2.03 and $2.05, and closed at $2.03. $2.03 represents a 7.6% discount to their $2.1969 NAV on that day. Not enough in my view, considering how much MGF have underperformed their own benchmark index over the past 5 years.

Sorry. I apparently didn't do my maths terribly well!

So I guess it depends whether you mind an exposure to those sort of companies. Kind of like a 7.6% starting point over 4 months.

Weird, Magellan's website seems to be down today.

The risk depends on in what context you are buying it for. For example such a discount I would view MGF as very attractive versus a fairly vanilla global equity ETF or S&P500 ETF for the next 4 or 5 months. For sure MGF could underperfom during this time, (they also might do better), however 7% buffer or thereabouts whatever it is tilt the odds much in your favour I think. I do not see risks that the conversion process does not happen. Always some small risks that they drag their heels and maybe have some sneaky clauses in that shave off a percent or two. Having said that this has been a very public battle, so I would expect them more likely to treat holders ok in this process.

100% Agree @stevegreenycom that if you want exposure to those companies, this is a good way to get it at a ~7% discount, but I don't like it purely as a straight arbitrage play because of the NAV variability between now and the conversion date. But as an exposure to those companies it does make sense. I think with Hamish out of the picture now and the portfolio management stability with Nikki and Arvid running the fund, they are unlikely to change the fund around too much in 4 months, just some minor tweaking and perhaps one or two ins and outs but I doubt we'd see any wholesale changes.

I tried to look at the daily NAV last night @Hackofalltrades using the website they mention in their weekly NAV announcements and it was down last night as well. Interesting.

I'm still not having any luck accessing the Magellan website. I'm guessing it's the same for everyone? Is there another way to check the most up to date NAV of the MGF fund?

I got the same error again just now @Hackofalltrades - while using Microsoft Edge Chromium (web browser) and there was some text on the error page saying that the site had redirected me too many times - however I copied the link from the Weekly-NAV.PDF announcement - this link: https://www.magellangroup.com.au/funds/magellan-global-fund-closed-class-asx-mgf/ - and tried it using two other browsers - Firefox and Google Chrome - and the link worked in those browsers, then I tried pasting the link directly into a fresh tab in MS Edge Chromium and it actually worked there too - so it works if I copy the link and paste it into a tab, but not if I click on the link from within their announcement - weird! Anyway - here's a screenshot of their website page taken 1 minute ago with the latest MGF NAV:

Arrow added by me.

They are converting MGF closed class to open class in the second quarter of CY2024 @TycoonTerry - so AFTER the options expire, and they are probably thinking about the MGF unit price (share price) moving closer to NAV as this gets closer, and then the MGFO (options) being worth more, so they would rather just take the hit and buy those options now at 10 cents each. This could (a) potentially save them money if the options are in the money and worth more than 10 cents in Feb next year (they expire on March 1st 2024) and (b) it spreads out their costs so they don't have to take so much of a hit all at once, because they will get selling pressure on the open class units once the closed class is converted to open class, as there would be quite a few MGF holders who are unhappy with the performance of the fund and want to get out but are unwilling to do it at the current discount to net asset value, and possibly (c) they want to try to nullify Nick Bolton and his Keybridge Capital (the largest holder of these options) from taking any further legal action against MGF or MFG. Selling his options at 10 cents each would give Nick a massive profit on the millions of options he has accumulated at around 1 to 2 cents per option. It's a bit unexpected from MGF, but welcome. I just sold mine on-market at 10 cents each.

Finally got a chance to exit MGFO and cover the brokerage as well instead of waiting for the call options to expire in March 24.

Patience is a virtue.

Question from the uninitiated ... how does one even sell these (mine are not under my standard brokerage account but rather only appear under my apexgroupportal login (mine all came via my original unlisted managed fund holding - i.e. MGOC + MGF + MGFO)). Do I have to transfer the holdings to my standard broker HIN to sell or is there some mechanism within the managed fund services to do this directly?

If you go to the investor login at the Magellan login. Basically follow the log in and get yourself to the point where you have the option to exercise the option….. don’t actually exercise it. But maybe in there you may have the option to sell.

Personally mine showed in my Commsec and following the lead by @Bear77 I sold on market. If you need to transfer anything in order to sell it I would get onto that ASAP as those processes can take time.

If you are CHESS sponsored - by Selfwealth, Commsec, NABTrade, etc, then the MGFO (options) will be listed in your holdings on a seperate line (as MGFO) and you just sell them as you would any other shares. If you are instead issuer sponsored, then you may have to go through MFG's website as @TycoonTerry suggests, coz MFG manage MGF and the MGF options.

My MGFO was sitting in my trading account for years which I received about the time I sold MGF but the tbrokerage fee meant it wasn't worth selling till now.

It's funny that now the MGF share price has just gone above my sale price. Guess those buybacks are paying off.

Anyway, maybe contact the share registry for Magellan Global Fund - "Mainstream Fund Services Pvt Ltd"

Warning - Did a google search and found the Mainstream website but the cert has expired

I think the buybacks are helping raise the price of MGF units @edgescape - they have been VERY active with the buybacks - most of the traded units on most trading days seem to be MFG buying back MGF units - however I also think that setting a timeline of the June quarter of 2024 (just after the MGFO options expire in March) as the period in which the closed class MGF units will be converted into open class units (see: Decision-to-proceed-with-Conversion-Proposal.PDF) - which will trade at NAV - is causing the gap between the MGF units and the MGF NAV to close gradually as we approach that conversion, due to the arbitrage available, assuming the NAV doesn't fall between now and then to below prices paid for MGF today - which is of course the most obvious risk to that "arb" strategy, and why I wouldn't be interested in playing that game.

Here's how the gap has been closing:

Date, NAV, Closing Share Price, Discount to NAV in the share price:

30-Dec-2022, $1.6986, $1.415, 16.7%

30-Jun-2023, $1.9704, $1.65, 16.3%

29-Sep-2023, $1.8716, $1.65, 11.8%

01-Dec-2023, $1.9940, $1.86, 6.7%

08-Dec-2023, $2.0123, $1.88, 6.6%

Those NAVs (Net Asset Values per unit) are straight from the MGF announcements, and the closing prices are from Commsec's Trade History data, so it should all be correct, and there's definitely a trend apparent there of a reducing discount to NAV in the share price.

Are you intending to hold onto MGOC once it transitions @Bear77 ?

I have been looking for out for years and as the NAV gap closes I’m tempted to jump ship. I have learned a lot through holding these over the years.

No @TycoonTerry I sold my MGF @ $1.82 on 13/11/23 (last month) and used those funds to buy more LYL @ $9.63. I know MGF is now $1.90, but LYL is now $10.97 (closed at $10.79 yesterday) so I'm happy with that move. I have no exposure to MFG or MGF at all now, not even through SNC - a LIC I held who hold MFG - as I have also exited SNC back in October the day before they went ex-div, which was a good exit point.

For clarification @TycoonTerry - I only held MGF in a two-stock portfolio (MGF + FGX) for our two children, and I sold both MGF and FGX on Nov 13 and bought Lycopodium shares with those funds, so then that portfolio just contained LYL and a small bunch of MGFO (options) - which I then sold on the day they popped to 10 cents/option on that Magellan announcement, so our kids' portfolio now only has LYL in it. A one-stock portfolio. Marcus Padley would be proud. Or he might be about the concept coz I don't think he's ever heard of Lycopodium. He certainly doesn't cover them in Marcus Today, but he's written a few times about one stock portfolios (all about the research you would do to have that much conviction in just one company). I also hold LYL in my largest real money portfolio and here on SM. I now have NO exposure to ANY LICs or LITs or options in any of the portfolios I manage. Or any exposure to fund managers like MFG. Much better!

@Bear77 As it happens I have account with all three of those CHESS sponsored brokers (Selfwealth, Commsec & NABtrade) but alas my MGFO doesn't appear under any of them (which probably means I never gave Magellan any HIN when I initially got the MGF units - so everything is tied to an SRN instead of a HIN)

@TycoonTerry @edgescape I can login via the Magellan login (on the Apex (formerly Mainstream) portal) and can see the options there (there is the option to Exercise them but alas no option to sell)

@Remorhaz

Maybe try and move the issuer sponsored holdings by putting in a request to one of your trading accounts.

See the screenshots from Directshares below as an example.

I did it for a couple of stocks with no issues but not for any listed options like MGFO. All they need is the name and address to match.

Worth asking the registry also for advice.

.

Yes @Remorhaz - what @edgescape said - transfer the MGFO - using the SRN - across to one of your CHESS sponsored broker accounts - so, to do it from your Commsec account (i.e. to use Commsec to transfer them across to your Commsec account):

1. Log in to Commsec and click on the "Home" tab at the top if not on the home screen.
2. Click on the yellow "View Holdings" tab a bit further down the screen.
3. Towards the top right corner of that "View Holdings" screen, you should see a "Transfer v" button - click on the "v" (down arrow) bit on the right side of that "Transfer v" button and you should see two options - and the first one is "Issuer Sponsored Holdings" - click on that one.
4. That should open up a new pop-up window titled "Transfer Holdings Request". That will have "From" options and "To" options. For "From" you want to choose the "Share registry" option, and for "To" you want to choose the Commsec account that your Commsec sponsored holdings are in.
5. You will be asked if the shares (options in this case but they don't know that) are registered in the same name as the name of the account you wish to transfer them to, and click "Yes" if they are. If they're not, that's a whole 'nother problem and this won't work.
6. It will then tell you that you're going to need an SRN. Click "Continue".
7. At this point my account sends a security code to my phone for me to enter in to prove I am me. This may not occur if you haven't signed up for 3FA - three factor authentification - it might ask you to set that up if you haven't already, but you get the idea.

I haven't gone any further than that tonight because I don't have any issuer sponsored shares to transfer, but I have done it all previously and it works - and doesn't cost anything to transfer them - and the brokerage for selling them isn't much either - Commsec charges $4.99 for buys or sells up to a value of $1,000, and if the sale or purchase is for between $1,000 and $3,000 is just $10 brokerage. Many retail investors are probably going to let their MGFO lapse because they don't think it's worth the brokerage fees to sell them, but when you can sell up to $1K worth for just a $4.99 fee, it's worth doing - coz once the options expire in March, they're totally worthless.

Once you've submitted the completed request, it can take two or three days for the transfer to go through and show up in your account. I've had a couple done within an hour when I applied during business hours, but the last one took 3 days. I think it depends on how quickly the share registry responds to the Commsec request. They can't refuse the transfer unless the names don't match, but sometimes they can drag their feet on it for a couple of days.