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SMSFs drive LIC launch

Absolute return investment manager Monash Investors has launched a listed investment company (LIC) on the back of demand for directly held investments from SMSF trustees.

The new LIC, called the Monash Absolute Investment Company, is aiming to avoid negative returns over a five to seven-year investment cycle. It will employ a long-short strategy for Australian equities similar to that of the firm’s managed fund, the Monash Absolute Investment Fund, and aims to provide similar returns of 15.9 per cent a year after fees.

“Financial advisers and brokers were telling us that their retail clients were very interested in our Monash Absolute Investment Fund, which had proven itself able to deliver consistent positive returns with low volatility and capital preservation, regardless of market conditions,” Monash Investors co-founder Simon Shields said.

“At the same time, their preferred structure was a direct investment rather than a managed fund, which made creating a LIC the logical next step.
“And in fact our view has been reinforced by the strong demand for this structure in recent capital raisings.”

Monash Investors’ other co-founder, Shane Fitzgerald, explained the investment process behind the new LIC was unique because it was unconstrained by style, stock size, strategy or benchmarks and carried less risk than a market-based index.

The investment philosophy instead concentrates on identifying mispriced equities, including the causes behind the inaccurate pricing, to select certain investment opportunities.

“The causes of mispricing can include anything from an underestimation of significant change in technology or customer behaviour to business disruption and misjudging risk,” Fitzgerald said.

“At the same time, because we are not forced to invest in any particular way, and have a very demanding hurdle rate of return, we have the luxury of pursuing only the most compelling opportunities.”

Shields said it was no surprise the demand for the new LIC among SMSFs was so high given the low returns and high volatility currently present in the market.

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