Australian Listed Investment Companies
Listed Investment Company
We are launching coverage of the Listed Investment Company (LIC) sector. A LIC is an investment company with a close-ended structure. There are only two ways to invest in a LIC; one is participating in the initial fundraising IPO or the other is buying shares on the ASX once the company is listed.
The net tangible assets (NTA) of a LIC effectively represent the performance of the underlying investment. A LIC that trades at a premium to NTA effectively represents investor confidence in the investment manager and that they will continue to achieve excess returns, where a LIC trading at discount expresses some concern or reservations on future performance. Further information can be found in this article from the ASX to learn more about how to value a LIC.
One advantage of a LIC compared to a Managed Fund is unlike a managed fund where investor redemptions require the fund to sell investments (occasionally at a loss) to effect redemptions a LIC does not, as LIC investors trade in the shares of the Company which does not impact the investment funds.
Some advantages of investing in a LIC can include, but not limited to, tax benefits (more info can be found from thisby the ATO), portfolio diversification and active management by investment professionals. However, there are disadvantages to LICs as well, including liquidity and price uncertainty.
At Mainstreet, we are currently in the process of reviewing the LIC sector that comprises of approximately 100 LICs. As a first step, to assist you in choosing the right LIC we have prepared a ratings spreadsheet that will be updated monthly. The current rankings are based on performance for now but, we are currently developing a sophisticated quantitative and qualitative matrix to add in our own scoring system in the future.
Our full LIC coverage is available to our Gold and Platinum subscribers that will be updated monthly. We will also be implementing additional features in the future to assist you in picking your stocks!
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