Low beta LICs & LITs for investors worried about market volatility

In this edition of the IIR LMI Monthly Update we take a look at the key news in May as well as some trade ideas for those investors that are seeking to reduce market exposure with some LICs and LITs that have historically had a low beta with equity markets. See the attached report for the trade ideas.

The keys news included:

HM1 Leadership Restructure

On 19 May 2025, Hearts & Minds Limited (ASX: HM1) announced the restructure of its leadership. After a short stint as CEO, Brett Jollie will step down from the role with the efficiency gains implemented in Brett’s short tenure resulting in the CEO position becoming a part time role. Richard Howes will be appointed to the position with Brett remaining with the business until 30 June 2025.

During his time at HM1 Brett has conducted a review of the operating model, established a new dedicated investment operations function and implemented an investment management system to automate and improve management and oversight. These enhancements have improved the automation and efficiency and are welcomed by the team, however reduce the operational requirements of the CEO position.

MIR Entitlement Offer Oversubscribed

On 6 May 2025, Mirrabooka Investments Limited (ASX: MIR) announced a 1-for-7 Entitlement Offer. Shares will be issued at $3.06 per share, representing the average of the weekly estimated pre-tax NTA over the period from 4 April 2025 to 2 May 2025. The Company opted to base the offer price on the average NTA given the volatility in the market.

The Company was seeking to raise up to $85 million with the capital to be deployed in line with the investment mandate of the Company. The Company may not deploy the capital raised straight away with the team seeking to take advantage of opportunities with the expectation of uncertain conditions in coming months.

The Offer closed on 2 June 2025, with the Offer oversubscribed as investors took the opportunity to gain additional exposure at what has turned out to be a significant discount to NTA as at 31 May 2025 given the market rally. The Board has determined to scale back some of the applications given the oversubscription. Shares issued under the Offer are expected to commence trading on 11 June 2025 with the new shares eligible for the final dividend of 6.5 cents per share, fully franked.

WHF NPAT Up 9.6% in FY25

During the month, Whitefield Industrials Limited (ASX: WHF) released the results for the year ended 31 March 2025. Revenue from ordinary activities was up 6.9% on the pcp to $26.4 million and NPAT was up 9.6% to $22.4 million. Investment revenue was driven by dividend increases across a number of holdings including CBA, WBC, NAB, QBE and Woolworths.

The Company declared a final dividend of 10.5 cents per share. The dividend will be fully franked and 20% of its value will be attributed to LIC Capital Gains. The EPS of 18.7 cents per share is below the full year dividend of 21 cents per share, however the Company is confident it will continue to grow its Investment Revenue and has a healthy level of reserves and retained profits to draw on to top up the dividend.

On a gross basis, the portfolio achieved its objective of outperforming the S&P/ASX 200 Industrials Accumulation Index and outperformed the broader domestic market with WHF being one of the better performers in the peer group over the short and medium term periods.

PCI Prepares for Michael Korber’s Retirement

On 3 June 2025, Perpetual Credit Income Trust (ASX: PCI) announced the appointment of Greg Stock as Deputy Portfolio Manager for the PCI portfolio, effective 1 July 2025. The announcement comes as the Manager prepares for the retirement of Michael Korber. Michael will maintain his portfolio management responsibilities for a period of up to 12 months to ensure a smooth transition.

Greg is currently the Head of Credit Research and a Senior Portfolio Manager at Perpetual and has been with the Credit and Fixed Income team for over 20 years. Greg has also been appointed as Deputy Portfolio Manager for the Perpetual Pure Alpha Credit Fund, which Michael is also the Portfolio Manager.

MXT Raises $315 million from Wholesale Investors

During the month, Metrics Master Income Trust (ASX: MXT) raised $315 million from a Placement to Wholesale Investors. 157.5 million new units will be issued at a price of $2.00 per unit. The proceeds from the Placement will be invested in accordance with the investment mandate and target return of MXT being RBA Cash Rate + 3.25%p.a.

The Placement takes the number of units on issue to 1.22 billion and a market cap of in excess of $2.4 billion. The continued capital raising by the Manager highlights the significant pipeline of opportunities identified by the Manager.

CAM Proposes Extension of Convertible Notes

On 27 May 2025, Clime Capital Limited (ASX: CAM) announced the Board will be putting forward a Restructure Proposal to CAMG Noteholders, which will include a proposal to extend the maturity of the CAMG Notes, which are currently scheduled to mature on 30 November 2025, as well as increase the coupon rate and increase the frequency of interest payments. The Board will also be seeking to issue additional Notes, however the exact details of the Restructure Proposal are yet to be determined.

CAM currently has 33.6 million Convertible Notes on issue with an interest rate of 5.25%p.a., payable quarterly. The Notes have a face value of $1.00 with noteholders having the option on or before the maturity date to redeem, convert to equity or roll forward for another term. The Notes were previously rolled over in December 2021. Noteholders will need to approve the Restructure Proposal at a General Meeting. We await further details regarding the proposal.

D2O Confirm Settlement of Water Entitlements Sale

In May, Duxton Water Limited (ASX: D2O) announced that the sale of $121 million of water entitlements to the Australian Government that was announced in March 2025 has been settled.

The Company has allocated $108 million of the proceeds to repay its debt facilities with the remainder being used to settle upcoming tax obligations and other operating expenses. The repayment of the debt will see the Company’s net LVR decrease to ~3% based on the portfolio value as at 30 April 2025.

SNC Ups its Stake in SXL to Pursue Change

On 28 April 2025, the Manager of Sandon Capital Limited (ASX: SNC) became a substantial holder of Southern Cross Media Group Ltd (ASX: SXL) through its various vehicles, including SNC. The Manager took the position with the aim of agitating for changes with the board and management to unlock the value in the company.

The Manager also became a substantial shareholder in QPM Energy Ltd (ASX: QPM) in May, another company that has struggled to unlock value with the share price trading at $0.04, almost 50% below its 12-month high of $0.079 in January 2025. The positions come as SNC has exited (or will) a number of positions over the last 12 months including Global Data Centre Group, Midway Ltd, Wellard Ltd, A2B and Foundation Life.

Worried About Volatility ?

Despite the market volatility in April, the S&P/ASX 200 VIX Index is at low levels. But is this the calm before the storm? Often periods of very low volatility are followed by periods of high volatility. For those investors worried about volatility below we take a look at some LMIs that have exhibited a low beta historically.

In this edition of the IIR LMI Monthly Update we take a look at some trade ideas from the LICs and LITs rated by IIR that have exhibited low betas to the broader equity markets since their inception. For those investors seeking to reduce exposure to market risk, these vehicles may warrant further review. We note that beta is only one measure and should not be the only factor considered for an investment. The below are merely ideas for further consideration and is not investment advice. Investors should consult their financial adviser before making any investments.

The NTAs/NAVs of the LICs and LITs in the below table have exhibited a beta of less than 0.60 since listing compared to the S&P/ASX 200 Accumulation Index for those vehicles with predominantly domestic exposure and the MSCI World Net Index, AUD for those vehicles with global exposure.

The LICs and LITs are ranked from lowest to highest beta compared to the relevant broader equity market. There are 17 LICs and LITs whose NTA returns have had a beta of less than 0.6 since listing. Unsurprisingly, given our use of equity market indices the most prominent categories that feature are Fixed Income and Private Equity.

See the attached report for details regarding some trade ideas from the above tabled LICs and LITs.