If 24 LICs ran the Melbourne Cup, which would be our favourites..?

Daryl Wilson

We are proud to present our second annual form guide for the 'LIC Cup'. This race is even bigger than the Melbourne Cup! There is approximately $35 billion of gamblers' (investors') money at stake in this sector, so the stakes are certainly a lot higher! Show More

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If 24 LICs ran the Melbourne Cup... which would be our favourites?

Daryl Wilson

To win the Melbourne Cup requires a horse that is well trained, has a great jockey, and importantly hasn’t been hit too hard with a weight handicap from the stewards. To win the "Affluence LIC Cup", an LIC requires many of the same attributes... Show More

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Government's profound shift in thinking on property

Daryl Wilson

The Federal budget announcement that deductions for travel costs and certain depreciation allowances will no longer be available to landlords of residential property is a potential game-changer for residential property. These changes, combined with other changes to curb foreign buyer demand, are relatively small in terms of their market impact.... Show More

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How to invest in an expensive market

Daryl Wilson

It seems like we’ve been hearing about how expensive markets are for years. But with limited exceptions, most markets have continued to track higher and higher. Which brings with it a dilemma. It feels ever more uncomfortable putting money to work, but there’s no guarantees markets won’t keep going up.... Show More

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Hi Ian. You raise a very good point. Much like property and infrastructure, there tends to be a lag between valuations for PE businesses and market pricing. This can work in your favour when markets are going well, but the reverse is true in downturns. It can also be useful to review the valuation policy of the manager. Overall, we tend to look for a bigger discount than normal for any LIC investing in illiquid assets such as private equity.

On Three LICs we love right now -

Hi Tony. The LICs I referred to were the Asian Masters Fund (EAF) which was previously AUF. The Australian Governance Masters Index Fund (AQF) has also recently approved a similar restructure. Both are part of the Dixon/Evans and Partners stable of LICs.

On Avoiding the great 'Labor franking credit grab' -

Hi Peter. There are some ETF's that are short the market (e.g. Betashares Equities Bear Fund, ASX code: BEAR), but no LICs that we are aware of. Some LICs, such as ALF or CDM could potentially be net short at times, but I would say it would be rare.

On Some Listed Investment Companies we love right now -

Some great comments in here and it’s probably worth highlighting how we assess the likely winners. Certainly, to be first over any extended period in the LIC space, you need to have good investment performance from the manager. So, every one of our 24 runners are ones we think can outperform markets over the long term. But to come first, second or third needs something extra. In the case of LIC’s, that extra usually comes from positive changes in the discount/premium to NTA. For example, if a LIC goes from a 5% discount to a 5% premium, the total return for a shareholder is improved by 10%. Our favourites are those we believe have the best combination of potential for good investment performance AND potential for improvement in the NTA discount/premium. These are unlikely to be last year’s winners, nor those already trading at decent premiums to NTA.

On If 24 LICs ran the Melbourne Cup... which would be our favourites? -

Michael, I think there's merit in both. Both ETFs and LICs continue to grow strongly. We like LICs because of the price inefficiencies we can exploit. But you're right about ETFs - there's more choice and price/NTA certainty. We sometimes use ETF's as an alternative if we just want pure market exposure. Each investor will have their own preferences and it's good to have a choice.

On 10 things LIC investors must consider -

Thanks Jordan. It's certainly something we try to keep a very close eye on. A decent fall in house prices is probably going to have a very big impact on our economy. We want to know about it as early as we can..

On Government's profound shift in thinking on property -

Thanks Adam. We're about to make the Affluence Fund available to retail clients in the next few days and we're targeting research for later this year.

On How to invest in an expensive market -