What do retail investors want to hear from their fund manager?

This blog post topic came to mind after I read a post from another blogger. The post I refer to discusses whether fund managers are doing a good job communicating their ideas to attract retail investor demand.

It led me to think how some specific LICs are going in this area. I also wondered whether I have given this topic enough thought in the past, and how it may relate to the discount / premium LICs trade at.

I have read this particular blog regularly for a few reasons. It often goes into detail on some smaller less known companies, is prepared to disclose stocks it has bought, and overall comes across as thought provoking but with some sense of humour and humility.

Here is the specific link. I shall then explore the thoughts that first came to my mind about my own investing in LICs as a result of reading this article.

10 foot investor blog



I spend a huge part my week thinking about investing, but have I forgotten about how the average investor thinks? For example, an investor who may not devote a significant part of their time to watching the markets. How do they perceive the communications of some of the LIC fund managers? Can the fund manager relate well with the smaller investor?

Before I get into this, why does it matter for LIC investors?

For the old school low fee LICs, the whole marketing thing is not so important. Investors appreciate the low marketing expenses and low frills nature of the products.

For other LICs, I can still imagine some being of the opinion that communications are not necessarily that important. You could say if they invest the funds well, NTA growth follows and so does the share price. If you plan on holding as long as possible and even never selling, then does the discount to NTA matter that much? Despite such intentions, it is difficult to be confident that we will never require market liquidity to sell into. Unexpected cash flow needs may occur in our lives, or unexpected changes to management of the LIC may lead to wanting out. Personally, I would be frustrated if I had to sell at a discount to NTA of 20% plus. Effective marketing and communications can help limit the potential of a large discount to NTA.

Which LICs are getting it right?

After reading the 10foot investor’s post, immediately Forager and Wilson stood out to me as those doing a better job in this area. They both generally trade at large premiums to NTA. Performance is still easily the main reason for these premiums, but I think their effective communications also assists in establishing the premiums. Some of this effectiveness ties back to 10 foot’s blog post about how fund managers can communicate to retail investors.

Forager –

Steve Johnson spent most of his career before this business with the Intelligent Investors newsletter group. I believe this has given him a much better appreciation of how to explain their investment philosophy to retail investors. I can see on their blog that it starts back in March 2008. They were well ahead of other fund managers in even thinking about communications and engaging the retail investor.

Forager are not afraid to display their conviction on their investment calls. Steve Johnson helped kick start his career by investing heavily in RHG during the GFC. They have been prepared to publicly speak on large concentrated bets in their fund. A few stocks spring to mind in SSM, RNY & MAH in recent times. Importantly they were humble when RNY went from being a great contributor to performance to an absolute shocker. Therein lies the balance between conviction, but humility and never cockiness.

They often manage to explain in an easy way, that an ordinary company can be a great investment. Often by simply pointing out if they get things wrong there is some easy to explain margin of safety there, but they still stand with multiple ways of winning.

Foraging around for sometimes the lesser quality companies also makes Forager quite unique. These days I find everyone wants to copy Buffett in only screening for quality companies at fair prices. This is despite Buffett being very successful with a different style in his earlier decades, when not having the challenging task of managing the huge sums of money he does now.

I recently watched a lengthy YouTube video of Steve Johnson, where he happily shared what shaped his career early on. These personal experiences can better resonate with retail investors, and enable them to get a glimpse of the personality behind the manager. The regular appearances on Sky Business help also.

The interview I referred to is here.


Wilson Asset Management LICs

Wilson were earlier adopters of getting out there in each state of Australia and presenting their thoughts to their shareholders. I still haven’t made it to one yet, but I did attend a small version with a meeting about transitioning CYA. I also randomly bumped into Geoff at another very small company meeting. He seemed very approachable, engaging and happy to talk about the markets with those attending. I think he is quite good at explaining the risk / reward of stock specific investments in a simple to understand manner.

I think investors can relate well to him as for a long time now a key message of his is that he invests WAM the same way as he thinks about investing his own money. That is, he hates losing it. Therefore, you won’t see him celebrating if the ASX indices fall 30% one year and he is down 25%. Maybe not everyone will agree with me here, but I believe he has built up a great reputation on shareholder governance.

I think he described himself as the ‘LIC policeman”. I bought shares in TGG & HHV not long after the GFC, and although they worked out well, their shareholder governance was less than perfect. It took Wilson to put an end to the ridiculous right’s issues with these LICs in my opinion.

He takes pride in telling stories of some of these activism battles. I’ve seen other shareholders appreciate his enthusiasm in such areas, and develop trust with him. His commitment to getting the Future Generation Funds up and running also must help show a bit of the personality of the fund manager. The weekly emails sent out by the Wilson team also strike a good balance. They are easy to read and sometimes share what the other members in the team get up to outside of the office.

They run the Wilson funds very different from the benchmark. Of course, you obviously need to perform and they have been excellent. Yet being willing to succeed with a different type of portfolio like this wins a lot of respect form retail shareholders.

I’ve singled out Steve Johnson & Geoff Wilson in these cases, but my sense is that the team’s they have developed also share similar characteristics.

I don’t’ actually own Wilson LICs (apart from Future Gen Funds) or Forager, and they certainly don’t need me to pump up their tyres. But these stood out in my mind when reading the 10foot investor post.

A few other observations about some LICs in this area

EAI – Not long ago I posted a video of Mary Manning explaining this Asia focused LIC at a shareholder presentation. We were not seeing this in the early days of this Ellerston LIC. I thought she did an excellent job of dispelling some myths that the average retail investor may have about investing in the region. I think it is more than just a coincidence, that since the improved marketing and communication efforts from Ellerston, that the discount has reduced substantially.

Readers of my blog may have noticed for a bit of fun on the right side of the page, I had a “sin bin” area of some of my holdings. I earlier put EAI in the improved category but now writing this I have lifted them to graduate status.

TGG – A holding I moved back the other way after giving more consideration to this topic is TGG. I was pleased how their quarterly presentations look. I find their charts very interesting to read. Yet I am more of a value investing geek who is obsessed with this sort of stuff. How about the average retail shareholder? Geoff Wilson once remarked that TGG had a lot of scope to improve in this area and I am starting to appreciate what he may have meant.

They did produce a good last 12 months or so of performance, after struggling a bit the years prior. As a shareholder though, you may not be that aware of this. Other LICs I own I get regular emails telling me about their good performance. Their website looks a little old fashioned. I appreciate there is plenty of videos on their YouTube page to see how the portfolio managers are thinking here, but I am uncertain as to their effectiveness. They gave the impression to me they are part of a large organisation that may lack some creativity in this aspect. Whilst I find them interesting I wonder whether they resonate with other investors.

They seem to be lacking a face or two that can perhaps get in front of the likes of Sky Business and chat about what they are seeing in the markets, including some high conviction calls. Their portfolio tends to allocate only modest percentages to their top stock picks. I wonder if retail investors could identify more with some confident discussion on stories of their stock selections. They tend to emphasise their quantitative analysis quite a bit about overweighting Europe instead.

TGG still has a reasonable discount to NTA. This is despite good recent performance, buybacks and a very low management fee with no performance fees. Is improved marketing and communications the missing link here to bridge the discount?

NCC – About 18 months ago I estimated NCC traded at discount to NTA of more than 10%. At that stage they began a specific plan of boosting their efforts in marketing and communication. I became interested then and this became a positive short-term trade as I wrote about here. (don’t own anymore).


Like Wilson, they made a point back then of beginning to conduct investor presentations across the various states meeting face to face with investors. I have also noticed an increased media presence from them over this time. NAOS are another example of a manager making high conviction calls.

Perhaps it is just a coincidence, but I notice them consistently trade at a premium to NTA now. That is despite their portfolio performance during this specific time being disappointing. In fact, the shares look to be trading at a 10% premium now to the post tax NTA, and still a more modest premium to the pre-tax measure.

CAM- I may have to apologise here for those shareholders and fans of CAM. Haven’t looked at it closely for quite a while but I thought of it with this topic area. When I last looked, I thought their performance was average at best with their fees not cheap. They have shown a liking to issue new shares in a variety of ways over years, even at discounts to NTA. As I am writing I quickly went to some of the monthly reports to see how the performance numbers looked. I couldn’t seem to locate performance data, makes me wonder why this is so difficult to find. Maybe I should offer a prize for readers to dig them up and compare them to an appropriate benchmark?

I normally expect a LIC like this to easily trade at least at a 10% discount to NTA, but over the last year have often seen it with very little discount at all. Maybe some readers can tell me if I am being harsh here? Once again, I haven’t monitored it all that closely for a couple of years, so my thoughts might be a bit stale.

One explanation may be that with this LIC I am constantly confronted with many adds on the internet, unlike other fund managers. I can’t comment on the quality of the communications they send out if you click on the ad banners as haven’t done so. If anyone would like to comment please do so.

I do wonder though whether this aggressive marketing effort has helped it trade at a far smaller discount than it otherwise may have?

Final comments

Thanks for reading this and I understand those in older low fee, or perhaps quality LICs may be less bothered about these issues. Performance with the underlying investments is obviously the main game.

Because there are so many different types of retail investors out there I am interested if other’s have differing views about how some of the fund managers are engaging the retail investor. I am probably not the typical type of investor, so my views above may not be very widespread. Maybe you disagree that Forager and Wilson communicate that well? Do you have a strong view on any other fund mangers in this area, good or bad? Or perhaps you just don’t care!?

Just for disclosure, of those stocks mentioned above, I still own EAI & TGG at the time of writing this but that is not a recommendation. Although I highlighted positive aspects of Forager and Wilson funds, this is not to be taken as recommendations to buy.

Also take these thoughts with a grain of salt where I have suggested areas for improvement for some fund managers above. I have never worked professionally in equities funds management in my life, nor have any experience in sales & marketing!

11 thoughts on “What do retail investors want to hear from their fund manager?”

  1. Love this post. It’s an interesting subject for sure.

    On the performance reporting I find the dispersion in reporting detail and bases pretty crazy. To find comparable performance tables on a net basis can be tricky for a few managers.

    Fee disclosure can also be lacklustre. Trawling through asx announcements for the ipo prospectus is not a great look.

    Amusing to see the reporting clarity for the unlisted fund side by the same managers.

    It’d be interesting to see more clarity but unless we saw some regulatory pressure I doubt it. But that goes to the argument here, more transparency seems key to not trading at a persistent discount

    1. Spot on Cameron, fee disclosure and appropriate reporting of performance are two major topics in themselves.

      I doubt we will see any new regulations on this front any time soon. It would probably need a few major LIC disaster stories to act as a catalyst for any change.

      I have wondered whether it should be mandatory to report performance after all types of fees and expenses, for all time periods available. Also whether a clear management expense ratio (which also includes all expenses outside of the management fees) should be displayed prominently. If this was mandatory in each of the monthly NTA reports it may shock some shareholders of certain LICs.

      Maybe add to that separately splitting out the NTA dilution that the LIC has given shareholders historically from shares issued at discounts.

      I’m dreaming obviously!

      1. Haha one day perhaps one day. As with regulation I suspect you’re right though, a good crisis always manages to create action, funny that!

        I’m not sure why some managers don’t care more about these issues and rectifying them. I can’t believe they’re all just cynically plundering their investors as at least some of them seem to care so the inaction is a bit perplexing in all honesty.

  2. Retail investors, advisors and educated independent investors like yourself all gravitate towards money managers who are the best talkers, wrongly or rightly.

    Because “Let’s invest with Geoff Wilson” naturally sounds a lot more appealing than say investing in a faceless Colonial managed fund.

    Great personal branding probably gives the biggest boost to LICs. Real interviews – not the staged ones, comments and stories in the media is how fund managers can best stay on the radar. It doesn’t matter if they’re a bit boring, they are expected to be, that’s why we trust them with our money and not television presenters. Just imagine the discount/premium on a Carrie Bickmore Global Fund.

    Too much communication in the form of templated e-newsletters irritates me as well as some overly designed, contentless monthly reports. Not enough commentary can also irk me. I think some LICs are trying too hard with weekly email, like NAOS and Wilson.

    If a fund has a manager without media skills they simply need to get the basics right: monthly performance updates with investment stories and occasional letters to shareholders outlining their big picture.

    The Steve Johnson’s, Goeff Wilson’s and Kerr Nielson’s together collectively raise awareness of all LICs as an alternative investment option to individual shares, ETFs and managed funds. Not every manager needs to be a star.

    I think the average LIC investor is more educated and wealthy than the average person or the average managed fund investor. LIC’s are a concept that suits a more sophisticated audience so I think they’d prefer to be talked to like smart people.

    1. I agree with all your points John, thanks for commenting.

      It does depend a lot on the manager. For instance TGG trying to copy too much of the marketing template of Forager and Wilson wouldn’t work. Some other efforts may though. Perhaps the odd piece of media exposure about some European stock stories that have helped them outperform over the last 5 years.

      By the way what are the fees on the Carrie Bickmore Global Fund? I think that could raise $30 – $40 million in the current environment? 🙂

    1. Thanks Cameron. I have tried to look more at the CEF market in the US over the last year but haven’t invested much. Some of their funds have modest leverage built in within them which is one difference. I have seen a few examples over the last year of activists eventually making progress on wind ups, buybacks and mergers though.

      Like in Australia though the juicy discounts to asset backing are much tougher to find compared to 5 years ago. The fund in this podcast seems very short term focused. GVF on the ASX plays around in various CEFs on the US and UK exchanges. Sometimes it’s worth keeping an eye on some of their investments.

  3. Hi Steve, thanks for the post. I for one am sceptical of Geoff Wilson.

    I once asked one of the managers at WAM about their investment in DMX Corpration run by Steve McCarthy and Roger Collison. He had never heard of DMX and passed me on to Geoff to elaborate. Geoff described Roger as a “f****** idiot “and that “he remained invested in DMX to be a thorn in their side”.
    Admittedly, DMX is a minuscule investment but to me that attitude spoke volumes.

    1. How is it that one of the lead managers knew nothing about an investment held for many years?
    2. How does being a thorn in the side align with WAM investors best interests? The value of DMX is about half what it was at time of purchase.

    I actually think the stink between Geoff and HHV, which took place over many years, was a replica of the DMX investment but on the grandest scale. This time it was personal between Peter Hall and Geoff. This time he tried to be a thorn in HHV’s/Peter’s side. Geoff played his trump card in Paul Jensen to run HHV. Peter Hall replied by selling to Soul Patts which caught Geoff completely off-guard. Paul Jensen quite rightly acted in the best interests of HHV shareholders, and not in the best interest of Geoff Wilson, which also caught him off-guard. Getting the Millners to vote against Jensen was his only victory.

    I don’t think Geoff thought about HHV shareholders throughout the process. I think there was self-interest.
    Did he think he would take over HHV to form his global LIC? Possibly.

    It is reminiscent of his attempts at CYA. The idea was for CYA to be his large cap LIC, only to be thwarted. WLE was formed and now he will have to merge CYA and WLE.

    Disclosure: hold PIA (formerly HHV), previously held WAX

    1. Hi Juan,

      Thanks for commenting, all very interesting points.

      I think I did say not everyone would agree about Wilson and their corporate governance on some matters. Just to clarify when I mentioned HHV I was referring to a bit earlier. They began buying back shares more aggressively and thinking about dividends more. From memory around 2014 or so, a bit after a couple of major dilutive rights issues. I think Wilson was a factor sorting them out then.

      The more recent battle around Peter Hall’s departure I am probably more agree with you. I was no longer a shareholder then. But as an outsider I thought Wilson may have protected WAM shareholders too much rather than thinking about all HHV holders.

      I am only aware of the DMX small cap product but didn’t know that Wilson invested in the company. The questions you posed seem fair enough given the info you had.

      Now I am not necessarily saying these may be good answers. And let’s remember I don’t even know that much about DMX. But I’m just thinking of possibilities to add to the discussion.

      On point 1). As the WAM funds are growing I am getting the impression Geoff is delegating more and perhaps there is more specialisation going on. Eg Geoff focuses more on LIC activism and discount arbitrage. Other staff perhaps get their teeth into individual company stocks. Also was the DMX play very large in the portfolio? It would depend on a few things whether I was disappointed or not that one of the managers didn’t know about a stock in the portfolio. Probably would be disappointed but couldn’t say for sure.

      2. This point reminds me of his battles with the other main shareholder of HHY (old Hasting’s fund) so shall just comment in light of that for the moment. He once remarked that many shareholders saw him buy into HHY and followed him in. He then added that in part the battle was to look after them. He also may come across further battles with this other group of shareholders in HHY in other stocks.

      I am not sure if I personally agree with the possibilities I raised in point 2, but thought they may offer some additional thoughts to the debate.

      Sorry I can’t shed more light on specifically the DMX situation.

      I expected someone to bring up the HHV battle after Hall left which is a fair enough debate. I don’t want to come across as saying Wilson gets everything correct. I still don’t like it that they present performance figures pre fees. They are good enough to report after fees. I think in most matters though they do quite a good job, even if I am also a bit uncertain how they handled HHV in the last battle.

      I am less bothered about their efforts in CYA. Self interests perhaps but it was run fairly poorly for a long time so I think the best result occurred.


  4. Thanks for the reply Steve.

    DMX Corporation is a minuscule investment, can’t remember off the top of my head, maybe $50,000 – $60,000. Not imporatnt in the context of over $1B under management. Just tried to focus on the principle of investing in something that does not align with shareholders best interests.
    As far as what do retail investors want to hear from their fund manager? I don’t want to hear derogatory comments of others for one (comments were made in the foyer prior to meeting in Canberra about 18 months ago), and two, why would Geoff remain invested with the group if he felt they were inept.

    Steve, thanks for your blog. I find it really interesting, and the topics are thought provoking. I have very large holdings in LIC’s, and have done for some time.
    I like the discount to NTA on offer with PGF and have started following SEC recently. SEC top 4 stocks of AWE, SRX, PTM, and MND have had a stellar start to the year which should see their discount to NTA widen at their next report.

    Hold both PGF and SEC (very small parcel)

    1. Yes I see where you are coming from, am with you on the subject of derogatory comments. Management in other organisations can be frustrating as an investor. We should be open to criticise in that regard. Better to keep such criticisms factual rather than personal though I think.

      Sometimes you can feel though there is money to be made even though you disagree with what management are currently doing. Once again I don’t know about DMX here. I suppose in a case like that I would just want to hear how they plan to make it a profitable investment.

      But I invested in APW awhile back thinking a few things could change and the price was quite cheap. I still don’t agree with management’s actions in general but pleased with the returns so far and remain a shareholder. Wilson has made plenty of good returns in the past in stocks where he didn’t think management were very good. HHV, TGG, CYA we discussed could be examples.

      SEC looks one of the more reasonable float structures over the last few years. SRX will be a nice little kicker for them. In an ideal world I’d like the fund managers to display a record through a bear market. Now because it has been so long since one has occurred this is becoming rarer! Not really a criticism here, because the SEC managers are probably simply too young in their careers. Seems like they have done all they can since around 2013 working together at Schroders before going out on their own. They do say here they have a bias to small caps with strong balance sheets though. That will help if a market decline occurs.

      Anyway them and PGF amongst the better ones around these days even if I don’t hold them currently. Seems like you know what you are doing being on top of the potential intra month NTA moves.

      Hope you keep commenting more, an interesting different perspective on how others view the Wilson activism strategies. I had only touched on the positive aspect.

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