At first glance this blog post might appear to be only relevant to Contrarian Value Fund Ltd (ASX:CVF) and Global Value Fund Ltd (ASX:GVF) shareholders. I thought it was worth posting though because all LIC investors generally should ideally make themselves aware about certain issues. Part of the attraction for a fund manager launching a LIC is it is very “sticky” AUM revenue. Investors cannot redeem their funds like the traditional open-end managed fund structure. This “stickiness” of AUM fee revenue for the fund manager can often usually last for a decade whereby many Investment Management Agreements (IMAs) set their terms at 10 years.

If shareholders of a LIC decide they wish to wind up the company much earlier, it can therefore create some controversy.  This is in part what I touched on in a blog post a little over a year ago now below:


I considered the IMA an important aspect to think about if you were weighing up the chances of a LIC being taken over or wound up. The blog post in question is here where I discussed 5 FACTORS FOR PROFITING FROM ASX LIC TAKEOVERS AND WIND UPS – Value Investing for a living.

Closed-end funds in 2021 and 2022 – Perhaps not so “permanent capital”?

I wrote about the topic back then as I thought the long-term future of many LICs would in fact not be so “long-term”! Within a list of 9 LIC names I briefly discussed at the end, many of them have already announced they will not be continuing in the form they planned on when launched. 5 of the 9 for sure won’t be continuing in the same fashion, and another one of this bunch has announced a strategic review to reconsider its future.

Shareholders in Contrarian Value Fund Ltd (ASX:CVF) recently received a letter from Global Value Fund Ltd (ASX:GVF). I think it is worth all LIC investors to have a read. I suspect that many LIC investors handing over their hard-earned money at IPO stage often have not appreciated the value a fund manager gets from “locking this in”. Reading the letter may offer some insight as to how fund managers think of the value of locking in long term AUMs with LICs.

Here is the link to the shareholder letter.

Global Value Fund Letter – Global Value Investing in CEFs

GVF-letter-to-CVF-shareholders-26-Nov-2020_Final-2.pdf (

As always, my blog posts are not financial advice or advice on how to vote. The letter doesn’t necessarily represent my exact viewpoints on all these matters. It does however highlight the debates over termination fees and IMAs, and shareholders being aware of such potential issues is what this blog post is about.

For shareholders affected by this, as always, I do think you should take your right to vote seriously. Votes should be made within the next week as it closes the weekend ending the 13th. I also think it is fair for shareholders to be made aware of a letter from a large shareholder who owns more than 15% of the company. Whilst shareholders regularly hear the views of the board via company announcements, views of large shareholders often don’t reach the whole shareholder base. Shareholders are often even kept in the dark over details of merger offers the board have rejected. It is generally better to hear both sides of the story before deciding.


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