ETF Tendencies CEO Tom Lydon mentioned the Constancy Magellan ETF (FMAG) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Present.
The fund seeks long-term progress of capital. Usually investing primarily in fairness securities. Investing in both “progress” shares or “worth” shares, or each. Investing in home and international issuers. Utilizing basic evaluation of things similar to every issuer’s monetary situation and trade place, and market and financial circumstances to pick investments.
FMAG is an inexpensive and environment friendly approach to entry Constancy’s storied flagship fund technique. The actively managed Constancy® Magellan® Fund (FMAGX) has been round since Might 1963.
Magellan was arguably one of many largest mutual fund tales of the late 20th century. It had a mere $18 million in property underneath administration (AUM) when Peter Lynch took over in 1977. There is a wild 29%-plus common annual return that helped FMAGX swell to $14 billion in property by his departure in 1990. Whereas Magellan finally eclipsed the $100 billion AUM mark, it has since cooled off – immediately, it nonetheless manages a large $28.7 billion.
Usually investing primarily in widespread shares means investing in both “progress” shares or “worth” shares or each. FMAGX has a 0.79% expense ratio vs. FMAG’s 0.59% expense ratio.
FMAG is assessed as semi-transparent ETFs, which means the holdings are usually not disclosed to traders every day. The non-transparent nature helps the fund managers preserve their secret sauce with out being negatively affected by frontrunners.
Constancy’s lively fairness ETF mannequin employs an revolutionary ‘monitoring basket’ methodology, which maintains the advantages of the ETF construction, gives info to market members to advertise environment friendly buying and selling of shares, and preserves the power so as to add worth by lively administration.
Constancy will do that through a “proxy portfolio” that features precise inventory holdings and ETFs with holdings much like what Magellan holds. This “semi-transparent” wrapper permits Constancy to keep away from displaying all its playing cards whereas remaining compliant with SEC disclosure guidelines.
Magellan Mutual Fund vs. ETF
The ETF funding automobile is seen as a extra tax-efficient, simply accessible, and cheaper various to the standard Act 40 mutual fund. That is additionally a part of the continued adaptation within the fund trade as extra mutual funds search the advantages of the ETF fund wrapper. There’s additionally the chance of cannibalization in that the transfer might doubtlessly entice away from present mutual fund shareholders with a decrease price ETF.
Conversely, traders accustomed to the Magellan mutual fund may not be comfy with an ETF, whereas traders who’ve by no means heard of Magellan may not purchase that ETF, both. There’s threat in doing nothing in any respect – if an investor is already trying to migrate from mutual funds to ETFs, and Constancy would not provide comparable traces of merchandise on the ETF degree, that investor would possibly transfer cash into one other supplier’s fund.
Take heed to the total podcast episode on FMAG:
For extra podcast episodes that includes Tom Lydon, go to our podcasts class.
Learn extra on ETFtrends.com.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.
www.nasdaq.com