Some Listed Investment Companies we love right now
Future Generation Investment Company (ASX code: FGX)
Part of the Wilson Asset Management stable, this reasonably large LIC was conceived by Geoff Wilson to provide access to some great managers investing in Australian stocks, plus fulfil a charitable purpose.
The LIC invests with over a dozen quality fund managers, all of whom charge no fees. Most of the service providers to the LIC also change no fees. Instead of having to pay these fees, the LIC each year donates 1% of its capital to a range of children’s charities (Affluence have a similar philosophy which you can read about on our website). Shareholders in the LIC can have a say as to which charities get the largest donations. A brilliant concept, we think, with the added value of a great suite of underlying fund managers who have been good performers over long periods of time.
Future Generation Global Investment Company (ASX code: FGG)
After the success of the Australian version, this LIC was launched in 2015. Instead of investing with managers who buy Australian shares, this LIC focuses on managers who invest in global sharemarkets.
As with the Future Generations Investment Company, the underlying fund managers and most service providers all charge no fees. The LIC each year donates 1% of its capital to a range of charities focused on mental health.
Again, through this LIC you can get access to a number of great fund managers who have been investing in international stocks and producing very good results for many years.
Global Value Fund (ASX code: GVF)
This small-medium size LIC holds a concentrated portfolio of deep value international investments, with a focus on buying into both listed and unlisted funds at a discount to their net asset value. The manager operates out of London but visits Australia at least twice a year to meet investors. He is very astute investor with an eye for a bargain.
We like the focus on undervalued and unloved funds across the globe. The LIC has delivered pretty good results since listing, with quite low volatility. It also provides aces to a portfolio of investments which are very different to what is already likely to be in your portfolio.
Sandon Capital Limited (ASX code: SNC)
The smaller LIC usually holds about 30 ASX listed stocks including some other LIC's. They often run a high level of cash which can provide ammunition for additional purchases when markets fall or opportunities arise. Sandon Capital run an “activist” style fund which means they buy stakes in companies which could be run better or have hidden value. They then engage with management and the board of that company to try to bring about a positive change tot eh company’s share price. If a friendly approach is unsuccessful they may use more aggressive tactic to seek improvement.
Because of the type of strategy, the returns are less dependent on the direction of the overall stock market than others. This can help enormously to smooth out the ups and downs in the market.
This manager has delivered good investment results and is well supported by a number of industry heavyweight peers who we admire. They also have an unlisted fund running a similar strategy which is available to eligible investors.
Glennon Small Companies Limited (ASX code: GC1)
Michael Glennon has been managing money for quite a while, and delivering some pretty impressive results by investing in small and micro-cap stocks. For many years, his skills were only available to wealthy investors but in 2015, this LIC was launched to enable all investors to have access to what has been a very successful strategy.
This quite small LIC invests in a portfolio of between 20 and 60 ASX listed stocks outside the top 100 largest companies. They seek undervalued, sustainable businesses with superior management, barriers to entry and above average growth. Not easy to find, but nonetheless they can be very lucrative investments when you do.
Watermark Market Neutral Fund Limited (ASX code: WMK)
Justin Braitling has been running the larger and more well-known Australian Leaders Fund for some time and in 2014 launched the Watermark Market Neutral Fund. As its name suggests, this small-medium LIC runs a market neutral strategy, which means they buy a portfolio of companies they like and short (or sell) an equal value of companies they don’t like.
How this works in practice is a little technical, but the effect is that this LIC can make money irrespective of what the stockmarket is doing – they rely on their portfolio of companies they like outperforming the portfolio they don’t like.
This strategy is very different and tends to perform best when markets are falling, since the lower quality companies are likely to fall more than the good quality companies. It doesn’t work all the time and results can be unpredictable so we only ever hold a small proportion of our portfolios is LIC’s like this, but such investments can fulfill the dual role of being good long term performers while also helping your portfolio performance when markets are down.
Before you invest, read this!
We encourage you to do your research before investing in any LIC. Remember, a great LIC and a great manager is only part of the story. We also like to make sure they’re trading at the right price and that the assets they are investing in are not themselves overvalued. In the end it’s up to you to make the investment decision that’s right for you, in conjunction with your financial advisor if you have one.
If you’d like to learn more about who we invest with, you can also access our recent articles and reports on our website.
Take care and all the best with your investing.
Affluence Investment Team
Daryl has over 25 years’ experience in finance and investing. He formed Affluence to provide investors with regular income and long-term capital growth by investing with some of the best fund managers available in Australia.