WAM Income Maximiser bucks the market chaos to raise $150 million
In this edition of the IIR LMI Monthly Update we take a look at the key news in April as well as some trade ideas given the current dislocation between NTAs/NAVs and Share/Unit Prices across parts of the LIC and LIT market and the opportunities they potentially present for investors. See the attached report for the trade ideas.
The keys news in April included:
WAM Income Maximiser Limited Commences Trading
WAM Income Maximiser Limited (ASX: WMX) commenced trading on 30 April 2025 after raising $150.2 million, issuing 100.1 million shares at $1.50 per share. This was below the $510 million maximum subscription but given the market conditions during the capital raise we view this as a good result.
The Company has been well bid in its first few days of trading. Given the strategy and the current market environment, we would expect there to be support for those that might have been hesitant to invest in the eye of the storm during the capital raise.
To recap, WMX provides exposure to a multi-asset portfolio providing exposure to a combination of equity and debt securities with a “balanced” asset allocation. The core asset allocation is initially expected to be 60%-70% equities and 30%-40% debt. The allocation between the asset classes will be dynamic and at the discretion of the Manager based on the outputs from the investment process.
The equity component will be invested in what the Manager has determined to be high quality stocks from within the S&P/ASX 300 Index and the debt component will be invested in investment grade corporate bonds and notes, hybrids and short-term money market instruments. The Manager can invest in government bonds at its discretion, however investment grade corporate bonds, notes and hybrids are expected to be the core investments. The portfolio is designed to provide a regular income stream and capital growth over the long-term.
The Company will seek to provide a monthly income stream in the form of fully franked dividends with a target grossed-up income return of RBA Cash Rate + 2.5%p.a. The target income return will have reference to the NTA, not the share price. The Company will be seeking to be in a position to commence dividends in August 2025, subject to the portfolio performance and sufficient income being generated over that time, being three months after the IPO. The portfolio will be managed by Wilson Asset Management (International) Pty Ltd (the “Manager”), which is 100% owned by Geoff Wilson and forms part of the Wilson Asset Management Group. The Company has entered into a Manager Loan with the Investment Manager to cover the costs of the Offer. The Manager will drawdown an amount equal to the Offer costs with a maximum value of 2.5% of the maximum subscription amount. The loan is for a term of 36 months from the date of the allotment of shares and must be repaid in full regardless of whether the Manager is the Manager of the Company. The loan will be paid in monthly instalments, however the Manager retains the discretion to repay the loan early.
PAI and PMC Boards Recommend Scheme to Convert Shares into Units in ETMFs
During the month, the Boards of Platinum Asia Investments Limited (PAI) and Platinum Capital Limited (PMC) recommended investors vote in favour of the Scheme to convert shares into units of the respective ETMFs with the competing offer from PGF determined to not be superior to the Scheme.
The Board noted the following with regards to the Scheme:
- The Scheme achieves the primary objective of solving the discount on an ongoing basis whilst investors retain exposure to the strategy;
- The Scheme is in line with industry trends;
- Premiums for LICs can be transitory and may evaporate post an acquisition; and
- The Scheme is highly executable and proceeding according to schedule with shareholder meetings scheduled to for late July 2025.
With regards to the above, we agree that the Scheme achieves the primary objective of solving the ongoing discount although we note that the discount was predominantly driven by the relative underperformance of both strategies and a lack of demand for the strategies as a result. This has also been reflected by the outflows seen by the Manager more broadly and reflected by the lack of growth in the respective ETMFs. Also while there have been a number of LICs and LITs that have restructured to ETMFs or unlisted funds, we attribute this to shareholders seeking to exit underperforming strategies. Those strategies that are delivering on their investment objectives combined with stakeholder engagement have traded at more attractive prices over time.
PGF have seemingly stepped back from their offer with PGF’s response to the announcement stating that they “remain open to re-engaging with the PMC and PAI Boards at a future date, should it be appropriate to do so.”
PGFs offer hit a further set back after Platinum Asset Management Limited (ASX: PTM) and L1 Capital announced they were in discussions regarding a merger. L1 Capital have acquired a 9.6% shareholding in Platinum, acquiring Kerr Neilson’s share and Kerr Neilson has also granted a call option to L1 Capital over part of his remaining shareholding in Platinum, which would be exercisable in the event of a competing proposal. This means L1 Capital is well placed for the merger to proceed.
Under the current proposal, Platinum would issue shares to L1 Capital with L1 Capital shareholders owning ~75% of shares in Platinum post the merger. The combined entity would participate in performance fees relating to the first 5% of absolute returns from L1 Capital’s LIC, LSF, with any excess performance fees on returns above 5% distributed to existing L1 Capital shareholders.
PL8 Maintains June Quarter Dividend
Plato Income Maximiser Limited (ASX: PL8) announced that it intends to maintain the monthly dividend of $0.0055 per share for the June quarter. As at 31 March 2025, the Company’s franking account was $11.6 million ($0.016 per share), equivalent to $0.036 per share in fully franked dividends. As always, the Board will re-assess economic conditions in three months time when considering dividends for the September quarter.
RF1 Updates Investment Guidelines
In its investor update in April, Regal Investment Fund (ASX: RF1) announced updates to the investment guidelines. These include:
- Concentration - Single stock position limit of 2.5% with approval required from the Investment Committee (IC) beyond these limits. There will also be lower limits for stocks with binary outcomes.
- IC - Paul Moore and Adrian Redlich have been appointed to the IC. We view additional diversification to the IC as a positive.
- Correlation - there will be increased emphasis on uncorrelated strategies to improve risk-adjusted returns and reduce drawdowns. We note that since inception the Fund has increased the diversification of the strategies in the Fund and the recent increase in the Water strategy highlights the increased exposure to uncorrelated strategies.
- Liquidity - the Manager will enhance the liquidity requirements for large positions and seek to increase portfolio liquidity through the deployment of strategies with a higher median market cap.
The changes with respect to concentration and liquidity comes after the Fund wrote down the investment in Opthea Limited (ASX: OPT), which was a sizable investment in the Fund. Additional risk management is welcomed, however we do note that a number of the strategies are exposed to small and micro cap companies and asset classes that have lower levels of liquidity. One of the benefits of RF1, is that it provides secondary market liquidity to these asset classes.
As mentioned above, the Fund has increased the exposure to uncorrelated assets and is seeking to further increase the emphasis on uncorrelated strategies, with a key objective of the Fund to provide strong risk-adjusted returns with limited correlation to equity markets. The Fund has achieved this with the NAV delivering a return of 14.7%p.a. since inception to 31 March 2025 with a correlation of 0.46 to the S&P/ASX 300 Accumulation Index.
SNC Announces Quarterly Dividend of 1.4 cents per Share
Sandon Capital Investments Limited (ASX: SNC) announced it will be paying a quarterly dividend of 1.4 cents per share, fully franked in June. This is the second quarterly dividend declared since increasing the frequency from semi-annual to quarterly.
The quarterly dividend represents an annualised dividend of 5.6 cents per share and represents an annualised yield of 6.2% on the NTA and 7.2% on the share price as at 31 March 2025.
NC has a healthy level of dividend coverage and franking account with the capacity to pay fully franked dividends of 24 cents per share based on the current reserves. This represents more than 4 years of fully franked dividend coverage at the annualised rate of 5.6 cents per share.
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The views here are not recommendations and should not be considered as investment advice.
