6 thoughts on “ASX LIC TRENDS FOR 2021 IN TERMS OF DISCOUNTS / PREMIUMS & POTENTIAL IPOs”

  1. That is a nice article Steve, you know exactly what you are talking about as far as the ones i know.
    Good Luck with TGG

  2. Hi Steve, interesting insight. I myself have shifted lanes from camp LIC and am now focusing on the more efficient ETF structure, although I still do hold Milton corporation. I tended to just focus on the old school, low cost LICs (AFI, MLT, ARG, BKI) and not really into the more expensive ‘exotic’ ones youve mentioned. Ironically, the bigger the LICs become, the more likely they will be included as a very small % in the ETFs – unless I have my wires crossed? I never understood this cross ownership mechanic (such as two LICs owning 50% shares in each other) and how this is actually documented.

  3. Hi CaptainFI,

    As a general rule of thumb I consider the “old school” LICs probably the only ones that you can adopt a bit of a set and forget approach. Maybe even the Future Generation LICs but they are very different to the old school ones. Aside from those there about another 100 or so LICs out there and on average they will just show underperformance if held long term due to high fee structures. I usually only get interested as I take an active approach and occasionally some look appealing when the discount is nearer 20%.

    Focusing on ETFs instead of the old LICs these days might make sense with some of the premiums I have noticed. Also I think when I last checked the performance of Argo, BKI and MLT didn’t look all that great, although AFIC was going ok I think.

    In terms of LICs getting big enough to be included in ETFs I don’t think that is the case. I think from memory indices such as ASX200 and the like have a rule where LICs are excluded.

    I am guessing your cross ownership question comes from me mentioning some of the takeovers above. It has been a bit of more of a feature in the last year or so. When a LIC hasn’t been performing so well and trading at a large discount, shareholders often want to exit but not sell at the discount. If the investment management agreement permits, that can lead to action where shareholders can instead vote for a wind up (need a 5% holder to call a meeting though) so they can get their money back at NTA. (e.g. CVF ASX recently). It might also encourage a LIC with a premium to NTA to takeover and merge the underperforming LIC into its own. This allows shareholders in the underperforming LIC to potentially sell their investment in the merged entity without a discount. Or continue in the LIC via the one that took them over. This dynamic has seen WAM ASX takeover some LICs lately for example CIE ASX & CLF ASX. WAM get a good return from profiting on such targets by eliminating the discount and also boost the size of their LIC.

    Hope that makes some sense, if not let me know. If you prefer to stick to investments that ensure you get around index returns though such as AFIC or VAS ETF is not something that you need to worry or pay much attention to though. Thanks for reading and stopping by for a comment.

    Cheers
    Steve.

  4. When I mentioned “usual suspects” of LICs raising capital in this blog post, let’s just say the likes of CAM & WQG have never been shy coming forward with a new issue of shares! They are just a couple of more examples already in 2021, I am sure we will see more. Love how when some do the bonus options issues they are described as “loyalty” and given to you as a reward for free. How lovely and generous they are!

  5. When I see LICs raising capital I treat it as a market sell signal. CAM have a great record of issuing shares at cycle highs!

  6. Good point Bruce maybe it is a signal. CAM certainly don’t miss opportunities to increase that share count. 17 years nearly of mediocre (is that being kind?) returns? Although they are skillful at not displaying such returns on any of their reporting, which likes to change it’s styles / strategies every year or two.

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