Demand for listed investment companies (LICs) was rising as the products tapped into demand for liquid, accessible and compliance-friendly investments, according to Wilson Asset Management (WAM).
Speaking at a Spring FG event in Sydney yesterday, WAM chief executive Kate Thorley presented the case for LICs and examined how investors could select the option that best suited them.
She said by using LICs, investors could access a simplified way to build a diversified equities portfolio or add diversification to an existing portfolio.
The investment vehicles had historically outperformed managed funds, Thorley added, which was one of the main reasons behind chairman and portfolio manager Geoff Wilson originally founding the specialist LIC manager in 1997.
“As a fund manager you never want to be forced to buy or sell a stock in that portfolio just because a shareholder is coming or going, which is what managed fund managers are forced to do every day,” she said.
“Markets are cyclical and there’s a lot of emotion in terms of fear and greed. Everyone is piling their money at the top of the market so fund managers are forced to buy expensive stock.
“And during a GFC, when everyone is running for the doors, they’re potentially forced to sell stocks they think are quite cheap.”
Thorley said WAM believed the LIC structure was a superior investment as there was no need to worry about the actions of other unitholders, meaning the firm could be totally focused on managing money.
“The share price of the listed investment company can [also] trade at different levels to what the assets are actually worth; we think it’s a great opportunity to get something cheaply … and then sell at a premium,” she said.