Investments, LICs

LIC/LIT rationalisation is evolution

Listed investment companies Listed Investment trusts

The reduction in the number of listed investment companies and listed investment trusts is just an indication of sector evolution.

An industry body has allayed investor fears about the rationalisation of listed investment companies (LIC) and listed investment trusts (LIT), describing it as a positive development for the sector.

“The sector sits at around about $50 billion in terms of aggregated market cap and while there has been a lot of discussion that it is diminishing, it certainly has in the number of listed investment companies,” Listed Investment Companies and Trusts Association chief executive Ian Irvine told delegates at the Australian Shareholders’ Association 2024 Investor Conference held in Melbourne recently.

“But this is a bit of good gardening. This is a bit of pruning or weeding going on either through amalgamation or, in some cases, organisations deciding the company structure or the trust structure is not the right structure for them. It didn’t match the long-term investment horizon of their clients.”

Irvine pointed out a reduction in the number of LICs and LITs on the market was not the only aspect indicating the sector is currently undergoing a process of evolution.

To this end, he noted the asset classes to which the sector is providing investor access is also shifting.

According to Irvine, during the period spanning July 2007 to March 2024 the market has shifted away from a predominant (around 75 per cent) underlying asset focus on Australian equities to having a larger number of LICs and LITs concentrating on global stocks and specific themes such as fixed income.

He also took the opportunity to warn investors not to be discouraged if LICs and LITs are being traded at a discount compared with their net tangible assets.

“The market weighted average discount [for these offerings] as at the end of March this year was roughly 15 per cent,” he revealed.

“This is just like [what happens to] any other share available through the ASX (Australian Securities Exchange). CBA, Woolworths or another listed share can trade at a premium or a discount. You may not know they are, but with an LIC or LIT we tell you on a regular basis.

“Some investors see this as an opportunity and a way to actually take advantage of an underpriced asset.”


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