Magellan global fund options play ‘naive’: Wilson

afr.com:

Wilson Asset Management chairman Geoff Wilson says he expects Magellan Financial to run down the clock on the options tied to its $2.8 billion closed end fund before it acts to extinguish a double-digit discount between the unit price and asset value

The Magellan Global Fund is the subject of a potential push by activist investor Nick Bolton and his Keybridge Capital, which has been hoovering up cheap options tied to the fund. He intends to buy enough units in the fund to call for a vote and wind it up.

Wilson Asset Management chairman Geoff Wilson. WAM’s strategic value fund owns units in Magellan’s closed end fund.  

Mr Bolton’s Keybridge owns about 132 million of the 1 billion outstanding options that allow holders to buy into the closed end fund at a 7.5 per cent discount to the value of the assets, but the current 16 per cent discount trading means the options are of little value. This has allowed Mr Bolton to snap up the options in the hope of pushing for a wind-up in the trust as a means of closing the discount.

But to maximise his profits on the options, a successful wind-up must occur before the March 2024 expiry date, at which point the options become worthless.

“If you believe the discount would narrow naturally then the options are a great investment, but you have to be incredibly naive to believe that will happen due to a restructuring,” Mr Wilson told The Australian Financial Review on Wednesday.

WAM’s $207 million strategic value fund, known as WAR, has about 5 per cent of its capital in the Magellan Global Fund. Mr Wilson said this was to capitalise on the discount to net asset value, and a view that at some point investors would switch to buying units.

Separately, the ASX-listed Global Value Fund, with