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Update on MOGL and $3.34

30102017 MOGL $3.34

Update on MOGL and $3.34

Following our recent post about our forthcoming active Exchange Traded Managed Fund (ETMF), the Montgomery Global Equities Fund (ASX: MOGL), here’s a brief update on the progress towards its quotation on the ASX Aqua market.

We have been delighted with investor interest in MOGL, which has been reflected in a very strong level of pre-registration. If you have not already done so please PRE-REGISTER HERE.

We have finalised our offer documents and await ASIC and ASX sign-off before their release.

A recurring question relates to MOGL’s initial price of $3.34.

The cricket fans among you will note that 334 is both Sir Donald Bradman and Mark ‘Tubby’ Taylor’s highest test scores. But of course cricket doesn’t fully explain the selection of the initial price.

MOGL’s market maker, Macquarie, are responsible for managing the spread between the bid and the offer after MOGL lists on the ASX Aqua market. Macquarie will provide market liquidity on our behalf, and together we have determined listing MOGL at a price above $3.00 allows us to keep the spread as narrow as possible. By issuing at price of $3.34, we are able to combine the interests of you, our investors, with our love of cricket. After its initial quotation, MOGL can then trade at a narrow spread, which will generally be one ‘tick’ above and below the current iNAV price.

Existing investors in our unlisted global fund, the Montgomery Global Fund, will note that the buy price per unit was $1.1477 as at 25 October 2017. Does the difference in unit prices mean MOGL represents worse or better value at an application price of $3.34?

The short answer is no, there is no difference.

The first thing to note here is that MOGL substantially mirrors the Montgomery Global Fund. Although both funds will operate as separate unit trusts, they will be run as one portfolio by the same portfolio management team. In fact they will share a common portfolio of 15-30 high quality global business trading at attractive valuations, and in their absence both strategies also have the ability to hold up to 30 percent in cash.

The value of your investment, irrespective of whether in MOGL or in the Montgomery Global Fund, will always be calculated by multiplying the number of units or shares you own by the unit price or share’s value.

Hypothetically, let’s say that MOGL Enterprises is a company worth $5 billion and we decided to issue some shares to the general public. Whether we offer 10,000 shares or 100,000 shares, it will not change the company valuation of $5 billion.

Therefore receiving fewer shares in MOGL, when compared to units in the Montgomery Global Fund, upon application during the offer period, is largely irrelevant as the value of the assets will be the same (assuming MOGL trades close to its Net Asset Value upon listing). As such, you are indifferent as to whether the price is $3.34 or $1.15 .

At Montgomery we are always considering how investors might like to access our expertise.  An active ETMF quoted on the ASX Aqua market is simply another access point.

Overall, the total return from MOGL should track the total return of our unlisted Montgomery Global Fund. To date, we are very pleased with the Montgomery Global Fund’s performance. You can review this here.

If you wish to invest in MOGL during the offer period, the minimum investment will be $10,000 and your investment will not attract any brokerage fees. As soon as we receive regulatory approval, all pre-registered investors will be contacted via email with the offer documentation.

For even more information about the differences between an unlisted and listed managed fund, please read this recent post by Scott Phillips.

I look forward to you joining me in becoming an investor in MOGL.

INVEST WITH MONTGOMERY

Chief Executive Officer of Montgomery Investment Management, David has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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6 Comments

  1. Hi
    One of the advantages of ETMF is that one doesn’t need to have the 50K minimum to invest in the Montgomery Global. My question is how can it be the same investment when with MOGL the aim is for 4.5% yield while not the same story with the unlisted fund? Please explain
    Thanks
    Nir

    • Hi Nir,
      It’s thanks to a different structure. An unlisted unit trust is required to pay all its income and net capital gains out every year because the proceeds are taxed in the hands of the recipient/beneficiary. The unlisted unit trust can therefore pay much higher OR lower distributions year to year. The listed structure gives us the opportunity to attempt to even that out.

      • Hi, does that mean that the fund manager can’t reinvest dividends it receives from investee companies since it’s forced to pay them out to unit holders?

      • Hi Allan, Australian Trust Law deems distributions include interest on the cash component of the Fund; dividends on the equities component; net realised gains (or realised gains minus realised losses) less all expenses. Often when net realised gains are large, distributions are large. Conversely, in some years there may be large net realised losses, and may lead to a period of nil distributions. Most of these Funds receive the cash dividends from their investee companies and the Montgomery and Montgomery Global products are no different.

    • Hi Nir, if you invest directly, the minimum initial investment in the Montgomery Global Fund is $25,000. With some of the big name technology stocks moving up “vertically” it has recorded a wonderful few weeks.

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