Wilson Asset Management

WAM Global is going to be the newest listed investment company (LIC) to be launched by Wilson Asset Management (WAM).

Today, Geoff Wilson and Catriona Burns hosted a call to give some more details about the listing timeline and strategy of WAM Global.

One of the good points from the call was that Mr Wilson refuted that WAM is spreading itself too thin, instead the wider the investment universe the team are considering the better the whole group can invest. It can use the research to help the local-focused LICs.

Listing details

The plan is for the prospectus to be lodged with ASIC on 23 April 2018. The priority and general offers will close on 8 June 2018 and then the shares are expected to commence trading on 22 June 2018.

The shares will be offered at a price of $2.20 each, to be similar to the share price of WAM Capital Limited (ASX: WAM).

WAM Global is looking to raise at least $330 million but has set a limit of $550 million for the starting amount.

Unlike WAM Leaders Ltd (ASX: WLE), WAM Global will not have any option rights.

Investment process

Mr Wilson and Ms Burns both made the point that WAM Global will follow the same winning investment process that all the other WAM LICs do.

WAM Global will sit in cash unless it can find undervalued growth companies where a catalyst will improve the valuation and then the team sell that share when the valuation is reached. That sounds quite simple, but it isn’t easy at all – that’s why WAM have such a strong track record.

Just like the other LICs, WAM Global will completely index unaware. The LIC won’t use any actual currency hedging as part of the investment strategy.

Investment targets

WAM Global will likely have a portfolio of between 40 to 60 positions, although it will have the flexibility to have more than this. No position will go above 5% of the fund’s holdings.

Generally, the investment team will be looking at targets with a low price/earnings ratio but still growing at a decent rate.

Small to mid cap businesses will be the key targets as that’s where WAM’s expertise is. There are already a lot of analysts and investment funds covering the large stocks.

Ms Burns pointed to a number of areas that are growth areas. E-commerce, millennials using smartphones, artificial intelligence & automation, 5G, electric vehicles, the rising Asian middle class and food scarcity are all key ideas.

There won’t be a particular focus on either mature or emerging markets. Nor will there be a focus on just American markets. Europe, Japan and other areas all have exciting small to mid cap stocks that offer niche ideas.

What is the management fee?

The team disclosed that the management fee will be 1.25% per annum, which is more than the other WAM LICs. However, Mr Wilson explained that the reality is that if the WAM Global team is to meet with management of targets and holdings there will be a lot more travel costs, as one example about why the fee is slightly higher.

What about the dividend?

Just like the other WAM LICs, WAM Global will seek to pay investors a growing stream of fully franked dividends. It will be slightly harder to generate franking credits because WAM Global won’t be receiving fully franked dividends from other Australian companies, but it will still generate franking credits from the taxes it pays in Australia.

Speaking of franking credits, Mr Wilson said that Labor’s current plans were incredibly disappointing. He is happy to pay for tax if required, but on behalf of WAM shareholders he is doing his best to point out the issues. Moving the goalpost for retirees wasn’t a great idea.

Anything else?

A couple of other interesting points from the call was that if WAM Global was currently operating it would have around 25% cash, which seems a good amount considering the generally high valuations and increasing volatility.

He also said that if necessary it wouldn’t be that hard to turn WAM Capital or WAM Global into a trust to sidestep the franking credits issue.

Foolish takeaway

I’m very interested in the WAM Global LIC and will very likely invest early on or in the initial offer. I’m looking forward to reading more details when they become available.