In its latest Quarterly LMI Market Review, Independent Investment Research (IIR) provides detailed coverage of 49 listed investment companies, listed investment trusts and active ETFs including commentary, investment views and ratings. We have coverage across a number of sectors and investing strategies and provide insight into performance, discounts and premiums to NTA.
There are four additions to our coverage this quarter;
- Evans & Partners Australian Flagship Fund (ASX:EFF)
- eInvest Income Generator Fund (ASX:EIGA)
- Gryphon Capital Income Trust (ASX:GCI)
- L1 Long Short Fund Limited (ASX:LSF)
- WAM Global Limited - (ASX:WGB)
Click here to access a full copy of the review.
What is truly revealing and somewhat worrying from your report is that only 6 of the 49 LICS reviewed have outperformed the S&P/ASX All Ordinaries Index over the last 5 years. These LICs are run by professional fund managers. No wonder ETFs are proving so popular for so many people.
Hello Peter; Your report covers LIC's, LIT's, and actively managed ETF's. I am OK withLIC's but LIT's and actively managed ETF's are new to me and probably to many of your readers. Could you explain how these two trusts differ from each other? Why would a fund manager choose to use either the Lit or the actively managed ETF?
Hi Peter, Thanks for your comment and your interest in our research. A few points in response. 1. Of the 49 LICs/LITs in our report, only 21 have been listed for 5 years or more and thus have five year track records, so it is perhaps a little misleading to say that only six of the 49 have outperformed as it implies the remaining 43 have underperformed. This is not the case. 2. Not all of the 21 LICs/LITs should be compared with the S&P/ASX All Ordinaries Index. A benchmark relevant to their investment universe is more appropriate. When we compare the performance of the 21 LICs/LITs with a 5 year plus performance history, eight met or exceeded benchmark and 13 underperformed benchmark over the five years. 3. It is important to note that, depending on their investment mandates, actively managed funds will underperform in certain markets and outperform in others. As an example, some of the larger Australian Shares LICs/LITs deliberately underweight the resources sector and so can be expected to underperform during periods of resources market strength. This has happened over the past few years. For many of these LICs/LITs we believe a 10 year period is a better indicator of performance as it covers a full market cycle. 4. 19 of the LICs/LITs in our report have 10 year plus track records. Of these, 13 have matched or beaten their relevant benchmark over the period and six have underperformed. So, whilst it is true that some LICs and LITs have underperformed, a majority have outperformed – some, quite significantly. This highlights the importance of selecting well managed LICs/LITs that have a solid performance track record. 5. ETFs, LICs and LITs all have a place in the investment universe and it is up to individual investors to decide what best suits their own needs. Hope this helps.
Hi Anthony, Thanks for your question and your interest in our research. A listed investment trust (LIT) is closed ended meaning it has a fixed pool of capital like a LIC. This means the manager doesn’t have inflows or outflows to consider and can focus more on managing the portfolio without thinking about the need to invest new moneys or meet redemptions. Active ETFs, like passive ETFs, are open ended meaning the amount of money under management will rise or fall depending on new fund inflows and outflows. The manager has to issue new units for inflows and redeem units for outflows which may interfere with the efficient management of the investment portfolio. In the case of the active ETF, there is a market maker so this means the unit price should trade close to net asset value, whereas LITs can trade at discounts and premiums, just like LICs. Hope this helps.