The other issues are 1) continuing underperformance of most managers versus the indices 2) massive rise in availability of ETFs which perform in line with the index ( as opposed to underperform it ) and don't trade at annoying discounts or premiums to NTA 3) newer development being ETMF's, which always trade at or around NTA and are obviously much more liquid than unlisted funds.
Continuation votes should be a legal requirement. I lost a lot with one LIC which was once a sharemarket "darling". It had a disastrous 2019 and if the Manager had the interests of shareholders at heart, it would have been wound up so that investors could exit at NAV. Instead it has limped along at a 25-30% discount so the Manager can still collect fees. Disgraceful!
Chris, From this article, it seems that UK had the same problems with this product as we have here, and they fixed it to be a better, much more accepted product. Surely we can do the same. Lets find a leader who can guide the product changes and also educate investors and guide fund managers to promote themselves and their product. I hope this article becomes the stimulant to instigating this change, as I am keen on investing in selected LICs.
Carlos. all good points. One of the headwinds faced by the equity LICs in Australia is that many have a value style investing bias. Value has underperformed growth by most on record in the last 3 years. Hence why many LICs have underperformed which has exacerbated the NTA discount issue and impacted the returns to shareholders vs 'keeping up with the index'. A turn in the value cycle could be a catalyst for LIC outperformance.
Ian. Thanks for comments. I'm not sure if a continuation vote can be a legal requirement (imagine a regular listed company being required to wind the company up if its EPS isn't higher than the market over say 5 years) . But, as CEOs of listed companies and their Boards are on the hook for underperformance, so are LIC Boards and managers. If it didn't cost managers so much to raise the LIC capital in the first place, they may be more willing to have shorter locked in management agreements.
Graham. Indeed the UK overcame many of the same issues we face in Aus. Agree the industry needs to outline 'best practice initiatives' that can guide LIC Boards. As part of LICAT, that will need to be one of our roles. Co-ordinating an industry of 110 LICs isn't easy though but perhaps all of these (mostly common) issues raised in this article will give us something to rally around together.