Listed investment companies (LIC) are close end investment funds listed on the ASX. Each listed investment company has a specific mandate either focusing on Australia, overseas or a combination of the two.
Traditionally these funds were focused on the equity asset classes. Recently there has be a prolifieration of ASX LICs which provide fixed income exposures through listed debt funds.
Value of a share of listed investment company is dependent on the tangible value of the underlying assets in the fund divided by total units outstanding.
Difference between Listed Investment Companies and Exchange Traded Fund (ETF)
There are a couple large difference between LIC and ETFs.
LICs on otherhand are actively managed and the fund whilst is benchmarked against a specific index, the manager actively chooses what goes into the fund with the aim of outperforming the benchmark index over time.
Fees – The advantage of ETF has over listed investment company funds is its low cost. However it is important to note that it can be apples to orange comparison. ETFs are mostly passive funds while LICs being an active manager would have a higher cost to compensate for the work that is required to do the research to find the right investments. Most of these companies are also externally managed similar to index funds which means the fees are paid to the manager and the companies themselves do not employ the stock pickers or staff.
Aggregate value of the fund – Total value held by LICs are fixed and only changes through dividend reinvestment plans or the capital raise of additional capital.
Total asset under managed of any ETF listed on the ASX is based supply and demand of the fund by investors. It can change based on purchases and sales of the ETF units by investors. The aggregate amount in the fund matches changes in investor appetite.
What does a closed end fund mean?
Listed investment companies on other hand are closed end funds where the amount invested is fixed. Marginal buying and selling of listed investment companies shares only pushes the price of the companies up or down. Total value in the company does not change. Hence the price of LIC can be at a premium or discount to the underlying fund net asset value. Investors either buy or sell their shares in the company rather than buying into the fund or redeem thier shares.
By this virtue ETFs can be more liquid as excess demand and supply by investors can be filled by the market makers. Market gyrations in investor buying and selling of listed investment companies can move the share price either at a premium or discount to underlying asset value.
10 largest Australia Listed Investment Companies – ASX Benchmarks
Below is a partial list of LICs on the ASX. Not all companies are included but it provides a good picture of LIC options available which is benchmarked against the ASX indicies.
What this means is that the performance of the funds are tracked against a variation of the Australia benchmark index which is either ASX 200, 300 or the All ordinary index and in most instances the underlying investments are shares listed on the ASX.
|ASX Symbol||Name||Market Cap||Benchmark|
|AFI||Australian Foundation Investment Company Ltd||$6862.8 M||S&P/ASX 200 Accumulation Index|
|ARG||Argo Investments Ltd||$5142.1 M||S&P/ASX 200 Accumulation Index|
|MLT||Milton Corp Ltd||$2591.3 M||All Ordinaries Index|
|WAM||Wam Capital Ltd||$1464.2 M||All Ordinaries Accumulation Index|
|BKI||BKI Investment Company Ltd||$989.3 M||S&P/ASX 300 Accumulation Index|
|AUI||Australian United Investment Company Ltd||$937.1 M||S&P/ASX 200 Accumulation Index|
|DUI||Diversified United Investment Ltd||$826.4 M||S&P/ASX 200 Accumulation Index|
|WLE||Wam Leaders Ltd||$773.4 M||S&P/ASX 200 Accumulation Index|
|DJW||Djerriwarrh Investments Ltd||$556.1 M||S&P/ASX 200 Accumulation Index|
|WHF||Whitefield Ltd||$396.4 M||S&P/ASX 200 Accumulation Index|
The accumulation reference in the indicies means that the total benchmark is inclusive of the accumulated dividends invested at the time of payment so the total return of the listed investment including dividends is tracked against the return of the index plus the dividends.
It is important to note that because these investments are structured as proprietary limited companies (PTY Ltd) rather than trusts. The dividends paid from the companies are franked and the degree of franking credit is based on the dividends these companies received from the underlying investments.
10 largest Foreign Listed Investment Companies – Custom Benchmarks
The funds below are LICs on the ASX which invest in foreign equities. They provide a means for Australian investors to gain exposure to offshore equities with an active management strategies and daily liquidity. The options are more limited with only 3 funds near the $1 billion market cap.
|ASX Symbol||Name||Market Cap|
|MGG||Magellan Global Trust||$2160.0 M|
|MFF||MFF Capital Investments Ltd||$1459.4 M|
|VG1||VGI Partners Global Investments Ltd||$887.1 M|
|VGI||Hearts and Minds Investments Ltd||$552.8 M|
|LSF||VGI Partners Asian Investments Ltd||$483.1 M|
|HM1||Antipodes Global Investment Company Ltd||$482.1 M|
|APL||Wam Global Ltd||$379.2 M|
|WGB||Platinum Capital Ltd||$377.6 M|
|PAI||Platinum Asia Investments Ltd||$348.3 M|
|FGG||Future Generation Global Investment Company Ltd||$346.0 M|