The new Wilson LIC, WAM Strategic Value (ASX:WAR)
Whilst WAM Capital has some form using the underlying investment strategies planned for this new LIC, there are a few reasons to be cautious about jumping in. The performance fee is high, opportunities for this overall strategy have dried up somewhat compared to last year, and then there are the usual potential issues of buying LICs at IPO.
WAM Strategic Value (ASX:WAR) Performance Fee
As I understand it, 20% of positive returns on the portfolio. This is rather than for example a performance fee charged on outperformance over the ASX200 Accumulation index which is more common. There is a high watermark so I have seen worse structures I guess.
WAM Strategic Value (ASX:WAR) Current opportunities for the strategy
There looks to be a limited supply of new LICs which I expect to be the case for at least the remainder of this year. (This new WAR LIC of course is an exception). That could arguably see the trend of discounts tightening continue, which is positive for this strategy. On the supply side the demand is more being fulfilled in part by the usual suspects of existing LICs rushing to conduct bonus issues, SPPs etc. I blogged about this trend late last year, here is a link.. ASX LIC TRENDS FOR 2021 IN TERMS OF DISCOUNTS / PREMIUMS & POTENTIAL IPOs – Value Investing for a living
The challenging part is that discounts have already tightened quite a bit from the middle months of last year. There is also the challenge that WAR will have in getting set in the opportunities they like. Whilst they might see a LIC that is attractive with a market cap of $100 million or less, it might be challenging for WAR to get set. Volume traded might be fine for smaller investors like us, but we probably don’t have a new portfolio of $225 million to invest!
Potential investors in WAR should bear in mind that discounted LICs will not be the only strategy. Other discounted asset plays can be targets. Other opportunities will be in the likes of takeovers, wind ups, spin offs, corporate restructuring, hybrids. Once again this would have been a lot more attractive to start on this strategy last year. A goal of mine I discussed on the blog late last year was to search for more takeover and wind-up plays. I certainly did not expect markets to continue so strongly in 2021, but my performance has been acceptable thanks in part to some luck in the areas of takeovers and wind ups.
We have seen a boom in takeovers of late. Takeover plays like Think Childcare Ltd (ASX:TNK) & Mainstream Group Holdings Ltd (ASX:MAI) have seen bidding wars, I wonder how long the music can keep playing where so many acquirers remain so hungry to do a deal?
WAR will also look at the likes of IPOs, placements & block trades. These are areas smaller investors generally can not access well themselves, so that strengthens the case of getting exposure via an active manager here.
We should also note that these sorts of strategies are not new hunting ground for the WAM investment team. They have used these strategies for many years in the likes of WAM Capital & WAM Active in particular. It is just that going forward they would like to simplify the structures of their LICs and are moving the strategies I just referred to mainly to the new WAM Strategic Value LIC.
Buying ASX LICs at IPO
A lot has been said about the pitfalls of going in at IPO stage.
My thoughts on the typical cycle of a LIC from the IPO stage are outlined in this blog post here:
Have We Learnt Nothing from Investing in Closed End Funds / ASX LICs in the Last 30 Years? – Value Investing for a living
One thing that WAR might have going for it though, is that a fund size of $225 million is small in the context of the large marketing distribution that WAM has to promote to. That could help it to avoid this new LIC trading at a large discount in the first year. Shareholders in other Wilson LICs though have shown how they love their franked dividends. That might mean at some point in the first year or two we might get a lull in demand for WAR shares as patience is tested waiting for significant franking credits to build up to pay out high dividends.
WHICH LICs WILL WAM GO TO WAR ON?
In the prospectus and presentation WAR has mentioned some LICs that other Wilson LICs already own. It also cautions not to assume these will be the ones that WAR invests in. That makes sense because they may have accumulated them when discounts were different and far more attractive to now.
Here are some potential targets of WAR based on prior holdings they have disclosed. Bear in mind that does not necessarily mean I am bullish on these, I just thought it is an interesting discussion point. I would be interested if readers have an opinion on this, and maybe some other suggestions of WAR targets?
Are these WAR targets?
LICs WAR COULD TARGET IN 2021 / 2022?
Templeton Global Growth Fund (ASX:TGG) – Whilst the discount is not as large is it used to be, other Wilson LICs own 15% of TGG.
Antipodes Global Investment Company Ltd (ASX:APL) – Double digit discount of late and partial exit near NTA provided late in year via off market buyback.
L1 Long Short Fund Ltd (ASX:LSF) – Perhaps discount already tightening too quickly (after a recent Livewire podcast) for the new WAR LIC but in April generally larger than 10% discount to post tax NTA and larger than that to pretax NTA.
Spheria Emerging Companies Ltd (ASX:SEC) – I see this as more a LIC that they might be happy to stay in longer term rather than necessarily an activist target. I covered SEC briefly in this article, 2 ASX LICs I’m Watching Like A Hawk | Rask Media.
QV Equities Ltd (ASX:QVE) – Another one where the discount has tightened already a lot from the wides. Downside might be protected in the event the manager performed poorly in the next couple of years. The manager may not argue too strongly against converting this to an open-ended fund.
NAOS Small Cap Opportunities Company Ltd (ASX:NSC) – It might make sense to push to consolidate this LIC with other NAOS LICs to address the discount issue. Not sure if that solves all the issues though!
Thorney Opportunities Ltd (ASX:TOP) – A large discount remains (probably deservingly so to a large extent given fee structure) and their on market buyback has been a bit of a joke.
32 thoughts on “WHICH LICs COULD WAM GO TO WAR ON? WAM STRATEGIC VALUE REVIEW (ASX:WAR)”
Oh since I made this blog post today I have been listening to a replay of yesterday’s webinar. It looks like WAR might buy a lot of existing holding LICs from the likes of WAM & WAA in an “arm’s length” transaction to get a decent chunk of the portfolio started. So longer term sounds like Geoff wants to make it clear that going forward WAR is the one for these type of strategies.
With perhaps an exception to for example if they want to make a 100% takeover offer of a rival LIC. In such a case the expensive WAM scrip and big asset base could see them involved.
Due to the above I doubt it is a case of WAR having to quickly deploy a full $225 million into LICs in the secondary market. However if they do find a new LIC opportunity that is only closer to $50 million in size I guess it will still (like it has previously) be challenging for them to get set. I also suspect that some of the $225 million if they raise it will be deployed into LICs on the secondary market, I have my doubts they would fit out all of the new WAR portfolio from existing LICs from other Wilson funds. I must admit I am not clear to what extent though.
Not sure you read enough of the prospectus…. 5.4 …the Company has entered into a deed with WAM, WAA, WGB and one other to acquire LIC’s held by these entities…. “…despite this the Company does not expect the investments acquired from WAM entities to exceed (in aggregate) 80% to 90% of the value of the portfolio after the offer…” The prospectus lists 13 LICs held by WAM entities that fit the WAR investment strategy. This is a transfer of asset value from WAM, WAA, WGB to WAR. Simple. The current entities will receive MARKET value for the assets. The potential to realise returns closer to NTA will be moved into WAR.
It is a fair point and the quote you just made from the prospectus is something that I should have included in my blog post. Before WAR even came about I had previously had in mind a blog post as a general discussion about what LICs Wilson might be targeting. As a result I probably didn’t read the WAR prospectus details as closely as I would have liked before posting.
I did notice the quote you made from the prospectus shortly after and I tried to reflect that in my initial blog post comment. When you say it is a transfer of assets from other Wilson vehicles to WAR I more or less am in agreement there.
However the wording still leaves flexibility in terms of how much they will transfer. If they perceive an LIC asset is “incredibly cheap”, is it fair that WAM shareholders sell all of it to WAR shareholders at that level? Hopefully they don’t favour WAR because of there being higher performance fees to earn via WAR.
I also have a suspicion (but could be proved wrong), for a situation where they might like to creep up ownership of a LIC like TGG, maybe they will not transfer that across. They might utilize the new money raised via WAR to accumulate more.
Overall though yes I thought my blog post might have incorrectly gave the impression that there is a new lot of $225 million freshly chasing the LIC sector where that is not really the case. I still thought it is a useful discussion point though about which LICs Wilson might be targeting. After all there still might be some of the IPO proceeds that is new money directed at existing LIC supply in the secondary market.
Just to add a bit more colour in terms of the asset transfer that might take place. I would firstly consider it highly likely that WAR raise the $225 million. If they then bought about 80-90% of all the LICs that the other Wilson LICs own that only adds to about half of the $225 million fund size. This might mean they still have circa $100-$120 million of cash raised that they could be going into the secondary market buying more LICs.
Even the above comment might be overstating how much they transfer from the other LICs into WAR. For example if they transferred the entire stake they own in TGG, that would make up a very large portion of WAR assets. We are talking a TGG position size of circa 19%. Possible I guess but that would not be my expectation.
That is what I meant when not being clear how many LIC positions move across to WAR. Potentially around $125 million of existing positions could be swept across, but it wouldn’t shock me if they only swept across about $70 million and slowly built out more LIC positions from there via the secondary market. Depends if they are happy with the WAR portfolio having big bets on the likes of TGG, AUI & PIA.
Nice one as always Steve.
Have you had a look at MA1? They are small and used to be rather illiquid but the volumes have recently picked up. With the vote to convert done and dusted and approx 2 weeks from conversion to ETMF it’s still trading at a small discount with a few cents in franking banked up, but discount is probably not wide enough to entice WAM. I was expecting for it to trade to closer to NTA this close to conversion but surprised that’s not the case.
No I have not been following MA1 of late. I have often glanced at it over the last few years and thinking that it is attractive from a discount perspective but haven’t became a holder for a few reasons.
– I didn’t get a great deal of confidence in the fund managers themselves and their holdings. They seem to be quite active and change the portfolio quite a bit and like to invest in a fair share of high growth stocks.
– I have often felt that others might know more about this situation than me in terms of the timing of all this restructure to happen. In the earlier stages the dates kept on getting pushed back so that also created some doubt. I think there might have been a small unlisted holding from memory that I also didn’t know much about.
– Recently I have read other investors be annoyed at the overall process at these type of conversions, e.g ALF. (That can actually help present an opportunity as people sell on market too cheap, but maybe this has played in my mind also as a deterrent).
– Given some of the above it has often been a case of me not looking to make it a big weight anyway so have just not bothered to spent much time researching it. In the end have preferred to spend time reading about other stocks.
So to answer your question no I probably won’t look at it if there is only 2 weeks left to conversion.
Don’t interpret that as it not being potentially a good opportunity. In hindsight it would have been better for me to pull the trigger and buy this at those times I have had a glance and been tempted.
All the best if you are long MA1. I have seen some other short term event driven stuff in the last 6 months that have offered much higher returns than I would normally expect. CVF, AYS, ALF & XPL for example has surprised me so sometimes how there is no “catch” and just good short term returns to pick up on with these types of situations. Perhaps this is another one with MA1. Anyway thanks for the heads you never know maybe I will take a little look at it but guess I have to be fairly quick.
Steve- your reports are such a good read. Keep it up. ALF was always a safe bet to put a good chunk of the portfolio away and receive a nice return in a short period. Ive recently put all my ALF funds into CIE. 20% discount to NTA. WAM owning approx 70%. Proposed buy back from Contango being selective (just for WAM holders not shareholders), unless the minority shareholders vote that they should also be involved in the buyback. If this happens us minority holders will get a nice return. Worst case we dont get to participate in the buy back and we end up owning the shares that are now a long short fund, so there is some hedge against an overpriced market.
WAM’s holding should see some nice upside from here bridging the NTA discount. Could WAR also be involved in this one?
You always have a good understanding of these scenarios. What are your thought?
Ive got another spicey small cap share Im trying to buy which is well below it’s NTA, but wont mention yet as its hard to get set at the right price.
I have been giving CIE a little thought occasionally although yet to buy any. I agree there is a potential nice return if minority holders effectively vote that they should be treated like WAM ie equal access buyback.
Perhaps what has kept me cautious is the board of CIE and how they operate. Just wondering if somehow they will persuade a lot of holders to vote how they want. They seem to have some relationships with the retail broker networks, Switzers etc and can sometimes influence some retail investors to do some strange things.
When you talk about worst case I get where you are coming from you own shares in L/S fund but in this scenario I worry a little bit that the discount could blow out more. Admittedly it is already wide, just thinking there might be room for even bigger discount as the LIC will be very small and illiquid. I might be overstating this risk but has been in the back of my mind and had been thinking if I do buy CIE it might be quite a small position because of the illiquidity aspect in this scenario.
Overall though I am more on the same page as yourself and I wouldn’t rule out me having a small nibble if it looks like some tax loss selling happens to dump it in the next few weeks.
Could WAR be involved in this one? I tend to think not but only because Geoff on the webinar for WAR mentioned that when he tries full takeover bids it still might be more likely that he uses the larger WAM vehicle for such purposes.
All the best with your spicey small cap NTA play! I understand sometimes if they don’t trade much it can be better to keep any idea to yourself for quite awhile. If you feel like sharing at a later date I am naturally curious though.
Looks like my MA1 comment didn’t age well at all, lol. Shocker NTA update with fund down over 4 pct in the space of two weeks and at even wider discount now. Not quite 10 pct but with buyers non-existent I’m thinking to top up closer to delisting if there’s opportunity.
Agree that CVF and AYS were the recent good plays.
Not so sure on CIE now, for a bit of background, it was always at a permanent discount, which closed when WAM bid and remained close to NTA during the bid, but then when WAM did a deal with CIE board the discount blew out once the scrip deal closed. Are you suggesting there will be another campaign to exit at same price as WAM? I’m not so sure as there was a wide window last year with the scrip deal. That ship has sailed in my opinion.
Another point on CIE, I made note not to engage in anything that has Switzer, Kerr, Bourburis etc names attached to it including anyone who was on the board of CTN back in the pre-NAOS post-Stevens days. They don’t give two bobs about retail and I’m giving them and all their vehicles a wide berth.
In terms of the ship having sailed with CIE part of me thinks you may be correct. However it still requires the approval of shareholders to buyout the WAM stake and everything to go as the CIE board prefer. Some things have changed since about 9 months ago when CIE did a placement and went on a sales pitch with this new strategy. Despite the SPP price being discounted heavily to NTA at the time, the shares are currently under water from that level. Meanwhile market indices have surged about 20% in that time. CIE holders were sold the story how this was a plan to reduce the discount to NTA and achieve great performance, so far does not look like it is working so one wonders if shareholders believe anything the board will tell them this time?
If shareholders were to vote against this buyback that only allows WAM an exit, well it is left with a very unusual type of situation and Geoff usually tries to leave some tricks up his sleeve?
I am not all that confident I know how this all ends! But I am also not confident that the ship has necessarily sailed on this one. I may not ever have a position in this but I will find it interesting to watch nonetheless either way.
One point I think we can agree on is that I also am not a member of the fan club of a lot of the current and former directors of CIE / CTN / NAOS.
Thanks for your thoughts which are always highly valued.
It will be interesting to see how things pan out.
Great discussion here!!! Always love reading your new posts Steve 🙂 Its hard to find investors with a similar mindset in this growth market… I have a good feeling I know which stock Jason is talking about as I’m also trying to pick up some.
RE CIE – agreed it feels like a trap. I did buy in initially but sold as the paperwork is seemingly taking forever to prepare. There could be upside due to knocking back the selective buyback but there are alot of ifs and lots of boxes need to be ticked. It could be a while before it plays out. For now its on the watchlist.
RE MA1 – bear in mind that conversion into EMTF if going to leave you a share in an unlisted company that you won’t see proceeds from (after the initial distribution) for at least 2 years. I feel the documents provided by the company so far are a bit aggressive as they talk about value to be cash + franking credits and doesn’t discount time value. Although theoretically correct, I don’t believe paying $1 cash in exchange for $0.90 cash + $0.10 franking is the same. I think quite a few shareholders feel the same way hence why there has been a few sellers of decent ish parcels as of late.
Thanks for your thoughts there Dave. One reason I have not looked all that closely at MA1 of late is it didn’t feel like me the type of situation that usually trades cheap. They have had a very good year or so of performance and are very active on the marketing front, probably doing ok now at convincing some new investors to buy their story for the long term. I think the better LIC buying opportunities as a general rule of thumb is when the manager is a little out of favour.
I am a bit reluctant to try and play the discount contracting game with this one when I don’t have a good feel about how they go about investing and the NTA itself can be volatile. Full credit to them their performance is doing better now. I notice they sold Afterpay almost the very top tick of the share price in February. Part of me thinks what a great call. Then again I think they were probably bullish on the company at $130 / $140 area so that makes me scratch my head a bit. I remember when they did the IPO of MA1 it wasn’t crystal clear to me they had necessarily proven themselves with a really good solid verifiable track record as investors. (3.5 year record I think they launched the IPO on the back of).
Just had a look at their numbers of the longer unlisted strategy they are 12.7% vs ASX300 10.8% so I think now that more years have passed they deserve some more credit. Their average net exposure to the market is said to be around 79%.
just would like to quickly point out that as per the NOM they are talking about winding up unlisted MA1 by end of FY22. TBH I don’t mind it, but what I forgot to mention and I’m rather not happy about is that they are still charging full set of fees incl the full directors’ fees for running the shell with 3 unlisted holdings and cash. Shame Mr Clitheroe, shame. Also surprised that Miles from GVF didn’t have anything to say about that.
Hope MA1 plays out for you. I hope so for my own sake too 🙂 I have a small stake from a while back when I was looking at their options. I didn’t commit a full size portion to MA1 as it doesn’t look super attractive from a risk/reward play. I’m looking at buying $1 of value of $0.90 and this one doesn’t quite fit the bill at best you are probably paying $0.96-0.98 for $1 in cash + franking.
There are other plays that might present better opportunities in the meantime. If you are keen, have a look at CDM, that might pop a few % once their SPAC lists within the quarter.
Disclosure: I do hold CDM.
PS: Its nice to have some banter and sense check ideas. Hope you don’t mind us clogging up your page Steve 🙂
Feel free to keep commenting that was the idea because I had taken my eyes off many LICs thinking all the discounts have narrowed a lot from mid last year but perhaps I am missing a few opportunities. All the best with CDM. Do you happen to have in your mind an approximate % jump in the NTA that will occur when this Deep Green metals situation plays out?
EMTF (MAAT) listed yesterday, very interesting to see the iNAV update regularly on the Monash website. My first experience with this structure but good to see market makers in the market keeping it in a tight band.
Could be the future.
AFR article commenting that Monash expect to see 30% redeemed from the fund in the coming days. This will put pressure on them to sell in order to fund redemptions. They may have to stagger it if they don’t want to push down price on any illiquid holdings.
With MAAT listing at about 1.025, this is slightly higher than what they had in their presentation a while back. Its a good start. The key now is whether they can stick or beat their indicative numbers with a 0.17 distribution in Sep 21 and a 0.05 distribution in Jun 22.
Would be good for them to have told us what kind of unlisted holdings they had as that will drive those final distributions.
I haven’t been following the portfolio of Monash but is it looking a little bit more liquid than compared to other times in recent years? We have known for years now that GVF, Sandon & Phoenix were never going to stick around longer term so they have had a lot of time to prepare for that. On a different note the last week or so have noticed discounts on a couple of LICs I owned from the list in this blog post almost entirely close. LSF & APL spent months trading at double digit discounts to after tax NTA until WAR went on the marketing campaign. I wonder if WAM win more out of this than WAR. WAM get to sell out at better levels. By the time WAR gets their exposure are the LIC opportunities looking so great? It has been a big marketing push highlighting LICs I can’t open my daily emails without seeing a new GW interview right now!
There are 4 unlisted holdings, they’ve been disclosed previously, all I remember is one of them was due to list on nasdaq this calendar year. Hope there’s no setbacks there and also a plan to exit the other 3 at above carrying value consistent with the crazy current market.
Good to see the live NAV and the market makers not blinking at the volumes 8.5 mil and 1 mil yesterday and today. Apart from the parties listed in AFR article I seem to remember there were also Affluence and Glennon on the register, but they could only have fairly small holdings as their funds are small. Will be watching what the LIC industry makes of this conversion, looks like the pressure on the funds with perennial discounts will be on which is good. Add the WAR factor and interesting times ahead.
Interesting what Monash said in the article – they wouldn’t have bothered with the LIC again. LOL. They should have offered the chair to Wilson instead of Clitheroe, that would have solved all there discount woes right there.
Also, same as you i hold CDM and keen to offload, they did say the merged entity was to be listed by the end of this FY, was that correct? Haven’t seen or heard any updates on this.
Latest update was Deep Green Metals deal for CDM to complete in Jul 21. I think that one is definitely going to be a winner. Its discount hasn’t closed so far.
I’ve seen some crazy discounts close too. Even GC1 moved…
It will be interesting to see who WAR goes after first. I doubt they will run too many campaigns at the same time.
I guess this deep value play of finding discounted LIC will soon disappear…
Based on rough calcs say 27pc pre tax nta. They said at cost it makes up 2.8pc of their portfolio. Assume 300mil portfolio, this means at cost it would be about 9mil. They carry at 1.28 usd whereas spac trading at ~10usd. That is 9 times profit so they could be up 81mil. 81/300 = 27pc.
My first experience with spac reverse merger so no expert in this field
Feel free to shoot me a private message 🙂 if you want to discuss further
I am definitely no expert in this asset so had only scribbled down some rough calcs going by their announcement in March using a similar process. Although I seem to have used 1.38 and less of a multiplier than 9 times and an uplift more like 21pc.
Not a lot different anyway I guess was just wondering if anyone might be of the opinion that it trades more than the 10usd price. I don’t have any insight either way so just look at CDM as currently a discount of around 12% to pre tax, larger post tax. If you like Cadence as a manager not so bad I guess. If you have held them in the last year or so you would be happy I could understand sticking with them. I reckon if this particular transaction goes well and the discount moves to close to 5% they would be quick to raise capital. I remember for years they were always keen to get a second LIC going and eventually started a new unlisted fund I think. So I could imagine them not hesitating to conduct a dilutive raising down the track, they haven’t had such an opportunity for years because of the normally big discount.
Noted re capital raising. I haven’t really followed them over the years as I’m more focused on a liquidation event. My timeframe is a lot shorter. I expect it to jump anywhere from 5-15% upon successful reverse merger, if it were to maintain its historical discount to NTA. If it doesn’t within a week or two of the updated NTA then I wouldn’t continue to hold.
I’m more an event driven investor as opposed to deep value 🙂
A great read thank you Steven and i enjoy the feedback from punters. A couple of ?’s
CDM running a second LIC ? I have held CDM for too many years, I say that as i fell victim to that shemozzle that was the Melbourne I.T. fiasco. He went against his own charter for us to be left with far too much exposure to one share. a big no no.
We are only JUST beginning to recover and a long way to go yet and glad to see the discount reducing to NTA. The only saving grace in my opinion is the constant nibbling from Karl to top up his holding. That helped me average down to a respectable level now.
If the U.S. listing goes ahead that might just get me ssome decent returns.
Can I ask if you have done any writing/opinion on ALF and its delisting.. I was hoping to get out at NTA but lost there as well.
Kind Regards .
Hi 7callow, I think CDM has another fund that I heard had been doing quite well, but that it was unlisted, shorter track record than CDM, and not a LIC. Others might know a bit more about it I haven’t followed it very closely. For as long as I can remember Karl was keen to get a second LIC going or another fund, and thought he got something unlisted going a few years ago.
In regards to ALF I personally ceased holding before the stock was delisted to transition to unlisted. My understanding was that you could redeem on a monthly basis very close to NTA, by that I mean NTA less a 2% charge. I think if you are willing to stay invested in this unlisted product for a 12 month period, then this 2% exit fee no longer gets charged. However I stress I don’t hold anymore so best to read the scheme documents etc whatever you have received. I don’t have a strong opinion either way how is fund will go in terms of future performance.
I hear you Dave what you are suggesting for a short term bump up in the share price is very plausible. I sometimes own LICs on more of a longer term timeframe but I also are keen to look at these situations as short term event driven opportunities. This one does sound on the tempting side for reasons you suggest. Guess it is nice when occasionally the short term event opportunity also happens to line up with a holding that looks good on longer time horizons. All the best with it anyway.
the performance fee is outrageously high against a zero benchmark and that alone dissuades from investing in this LIC unless perhaps if it trades at a substantial discount to NAV. certainly not buying the IPO.
It is a very expensive performance fee structure Carlos. A “performance” fee you get hit with potentially even if they substantially underperform the ASX200.
I regularly see LIC investors who participate at IPO and only later complain about the performance fee structure. It feels like many do not even read the prospectus. I am witnessing that right now with VG1. What happens is that in the media campaign they have good relationships with the media so this aspect generally goes unmentioned. I must have read well over a dozen articles / interviews and listened to two webinars of this WAR LIC. The performance fee is glossed over, which is in part why I tried to make it clear at the top of my blog post. I find it surprising that so many Q&As were addressed in two different one hour webinars hosted by Wilson about WAR but no questions were about the fee structure.
I think SOL’s latest move on MLT is far more interesting than WAR’s plans for the future.
Even though Wlison holdings pay lovely dividends I am still slowly selling down one by one (still have some WAA, WLE and WAX left) as CGT implications allow and replacing with index ETFs and old style LICs/conglomerates.
WAR does not stir any interest in me in the least.
WAR seems to be trading at a premium already. This is difficult to fathom. Unlike the other WAM vehicles trading at a premium, WAR doesn’t have a strong performance record; or a big bank of retained profits and franking credits. Moreover, it seems to have acquired the bulk of its LIC shareholdings on relatively skinny discounts. Coupled with the fee structure, it is hard to see sustained outperformance from WAR any time soon despite Geoff Wilson’s record as a funds manager.
At the moment anyone wanting a packaged exposure to a discount capture strategy is likely to be better off in the Global Value Fund (ASX: GVF). GVF has a solid dividend paying record, a reasonable bank of retained profits/franking credits and a more reasonable fee structure (15% above benchmark subject to a high watermark). Furthermore, as the name suggests, GVF looks for opportunities on a global basis; not just among ASX listed LICs where discounts have generally narrowed (GVF’s 31 May report show a 31% AUD exposure). GVF currently seems to be trading at a small discount to NTA. Geoff Wilson is a director of GVF.
For completeness, I hold GVF.
Great points I think Fei. The WAR portfolio might get off to a handy start with some value extraction from TGG and others last week or two. However yes despite that looks like for sure trading at a premium already. I would also bet strong from these levels here that a GVF shareholder will outperform a WAR shareholder in the long run. I think WAR might scratch out some outperformance of the ASX200 accumulation index before fees, but I think it will be challenging to beat that benchmark after all fees and costs.