Here is my medium term ASX LIC performance comparison of the most popular LICs against relevant ASX index ETFs.
This is a task I planned to get around doing, when earlier in the year I compared the various ASX LICs performance for FY 2022.
To clarify, I didn’t examine every LIC. I simply looked up all ASX LICs in the equity space from a list in May and used those above $500 million.
I used Sharesight to create some trades assuming I bought the securities on the last day in 2018. Therefore my performance table here is simply total shareholder return. As sharesight users may be familiar with, it displays returns pre-tax, i.e. including benefit of grossed up dividends in terms of franking. So it could arguably be flattering in that regard compared to how some in the industry express returns.
Some may therefore be wondering why I didn’t use 5-year numbers. That was my plan, but with the LICs list I had, large LICs like Hearts and Minds Investments Ltd (ASX:HM1), L1 Long Short Fund Ltd (ASX:LSF), Ophir High Conviction Fund (ASX:OPH), VGI Partners Global Investments Ltd (ASX:VG1) and Wam Global Ltd (ASX:WGB) were not around then, whereas they could be included in a 4-year analysis. It was only Magellan Global Fund (ASX:MGF) & Regal Investment Fund (ASX:RF1) therefore that I left out here (from my FY22 analysis) with this longer-term comparison.
I thought it also makes it interesting because we probably don’t see the 4-year number in other places so might be something new with the data here. It also corresponds to the time where there was huge ASX LIC IPO issues around 2017/18. To raise so much money, assumedly many financial advisors were optimistic on some of these new ASX LICs, so the analysis might be interesting from that perspective.
WAM TAKEOVER
Another interesting perspective gained from this 4-year time period is because of the fact WAM Capital have launched many scrip takeovers on rival LICs in the last 4 years or so. The shareholders accepting such scrip would be exposed at various points to the performance of WAM Capital during this time. Or in some cases, WAM Global and WAM Leaders where they were used as the acquirer. Looking at the table further down those accepting WLE scrip for some takeovers that occurred probably happier campers than those who wound up with WAM / WGB scrip on other takeovers.
WHY IS WAM CAPITAL SHARE PRICE DROPPING IN 2022 / 2023?
WAM shares are dropping so much in the 2022 /2023 financial year as its relative performance to the broader market has disappointed in the last five years. It has been paying out dividends far higher than what the portfolio returns are generating over this time frame. Naturally, some investors may therefore query why one would pay a 20% premium to NTA for such ASX LIC.
LICs or stocks that were subject to scrip takeovers from the WAM stable that come to mind include PM Capital Asian Opportunities Fund (ASX: PAF), Concentrated Leaders Fund (ASX: CLF), Contango Income Generator (ASX: CIE), Templeton Global Growth Fund (ASX: TGG), Westoz (ASX: WIC), Ozgrowth ASX: OZG), Absolute Equity Performance Fund (ASX: AEG), Century Australia (ASX: CYA), Amaysim (ASX: AYS). There could be more I don’t know; it is hard to keep up!
As WAM often targeted underperforming LICs, does that make it trickier now to use their scrip? Let’s say take the worst LIC on the table below in VGI Partners Global Investments Ltd (ASX:VG1) as an example (where other shareholders e.g., David Kingston, have publicly criticised and WAM Strategic Value owns), nowadays it might be more difficult to use WAM / WGB scrip as a selling point compared to WLE scrip?
UNDERVALUED ASX STOCKS 2023
Another reason I thought a simple table like this might be interesting, is that some investors like to start their searches for undervalued stocks by seeing what stocks have been poor over the last few years. There is more than a few in that camp in the table as you will see further down. Whilst sometimes you can back a winner going with a contrarian view like that, I am not sure whether that’s necessarily a good strategy here.
ARE LICs BETTER THAN ETFs?
I am no financial advisor, so I am not drawing any conclusions here. There are some LICs in the list that have performed extremely well, and various ones have done a lot worse. The point of the blog post is to highlight information that often gets overlooked. Some fund managers choose to express performance before the effect of large fees, and may choose not to disclose performance data, and not include performance of index ETFs as a comparison. At least the methods I am using here are to compare in a like for like manner.
Admittedly my analysis here will include impacts that the movement in the discount / premiums to NTA can have on shareholder returns. Having said that, as we zoom out to a longer time period like this, the more likely that this is less of a factor.
Looking at the performance of some index ETFs, the time period has been bullish overall. One that gives a LIC a bit more time to establish itself and work on addressing any discount issues that may arise.
BEST ASX LISTED INVESTMENT COMPANIES (LICs) 2023
So which ASX LICs performed best in the 4 years leading up to 2023? (with the caveat past performance in not indicative of future results!).
The following table coming up captures the performance of many of the most popular ASX Listed Investment Companies (LICs) for the 4 calendar years leading up to January 1, 2023.
Below is the table. I also included in the list popular ETFs. These are Vanguard Australian Shares Index ETF (ASX:VAS) & Vanguard MSCI Index International Shares ETF (ASX:VGS) which might interest many in terms of doing a comparison.
ASX LICs vs ETFs PERFORMANCE COMPARISON 2023
| ASX TICKER | ASX SECURITY NAME | % Ann 4 yrs to 2023 |
| AFI | Australian Foundation Invest Comp | +12.3% |
| ARG | Argo Investments Limited | +10.3% |
| AUI | Australian United Investment Company Ltd | +11.5% |
| BKI | BKI Investment Company Ltd | +11.8% |
| CIN | Carlton Investments | +4.4% |
| DUI | Diversified United | +12.2% |
| FGX | Future Generation Investment Company | +6.3% |
| HM1 | Hearts And Minds | +1.7% |
| LSF | L1 Long Short Fund | +29.7% |
| MIR | Mirrabooka Invest. | +10.7% |
| OPH | Ophir High Cf | +9.1% |
| PGF | PM Capital Fund | +20.4% |
| VAS | Vanguard Australian Shares Index ETF | +12.4% |
| VG1 | VGI Partners Global | -6.3% |
| VGS | Vanguard MSCI Index Intl. Shares ETF | +13.7% |
| WAM | WAM Capital Limited | +4.0% |
| WGB | WAM Global Limited | +3.0% |
| WHF | Whitefield Ltd | +11.9% |
| WLE | WAM Leaders Limited | +18.7% |
SHARESIGHT REVIEW OF ASX LICs FOR 2023
Also whilst sharesight does a great job in producing the numbers, it does require my input initially, please be open to the possibility of errors! Another reason not to draw conclusions here and rely on this to make any decisions!
If you think I have made any errors with my data here feel free to message me at valueinvestingforaliving@gmail.com. I did enjoy engaging with the readers in the comments area in the past, but with ASIC this year thinking that the whole “finfluencer” thing is a big deal, I don’t want to have to think of legalities each time I post a little comment. So I think comments have been disabled on this post. Due to my low audience here, fortunately my follower count is probably too low that they would care anyway, but just in case. Jail doesn’t appeal to me, almost a couple of years recently living in the lockdown city of the word was bad enough!
Nothing wrong though I figure with pointing out some interesting factual data that is often buried under the radar.
ARE ASX LICs A GOOD INVESTMENT?
The objective here is to present the factual performance numbers here that often get buried into the background / hidden, and the reader can draw their own conclusions.
It is a complicated matter, since performance numbers displayed in the industry are not standardized across the board.
Without spending too much time in this particular blog post in going down the rabbit hole of ASX LIC performance reporting, I thought it is easier to link to a couple of previous articles below. Therefore those that wish to drill down and explore that area, refer to the below posts in previous years.
Playing Games with LIC Performance Reporting. – Value Investing for a living
SHOULD I INVEST IN ASX LICs VS MANAGED FUNDS? – Value Investing for a living
All the best for your investing in 2023!
* For those that like to perform their own sort of analysis like this using Sharesight, you can click on my affiliate link banner just below. There is a free level of membership to sign up to experiment with one portfolio initially of up to 10 holdings. Should one wish to purchase an annual premium plan using this link, you effectively save 4 months’ worth.
