Powered by MOMENTUM MEDIA
moneymanagement logo
 
 

Demand for LIC sector holds steady

listed-investment-company/listed-investment-trust/covid-19/licat/ETF/

2 February 2021
| By Oksana Patron |
image
image image
expand image

The demand for the Listed Investment Company (LIC) and Listed Investment Trust (LIT) sector holds steady despite a decline of 0.6% in the sector’s market capitalisation to $52.8 billion in the past 12 months.

According to the Listed Investment Companies and Trusts Association (LICAT), the steady capital base of a LIT allows it to invest in, and provide unitholders with the benefits of exposure to, longer term assets, while still providing those underlying shareholders with liquidity (the ability to buy or sell units at any time on market).

This is possible since LITs, like other trust structures such as exchange traded funds (ETFs) and managed funds, passed through income to investors untaxed. However, because of their closed end structure, and unlike open-ended ETFs or managed funds, LITs had a fixed capital base and were not forced to sell assets to meet withdrawal requests.

LICAT’s chief executive, Ian Irvine, said that in the reality of 2021 with the environment in which there would remain many challenges for society and for investors and the world would continue to grapple with the complexities of the COVID-19 pandemic, low interest rates, combative politics and an increasing urgency to address climate change, the supply of steady long-term investment capital to businesses in return for a sound level of investment income would be particularly important.

Also, an interesting development within the sector over recent years was the continuing growth of LITs, which utilised a closed end trust structure with the value of LITs standing now ~$10.6 billion and accounting for around 20% of the ~$52.8 billion LIC/LIT sector at the end of December 2020.

“Australia’s closed end investment sector consisting of LICS and LITs continues to be one sector suited to contributing this capital to business on one hand while providing investors with both liquidity and income on the other,” he said.

“As the sector enters its 98th year of continuous operation in Australia, it continues to provide retail investors and SMSF trustees with access to some of the largest and most cost-efficient actively managed investment entities in Australia.

“The significant longevity of the sector reflects the benefits of prudent and conservative management over many decades and over many different and at times difficult investment climates.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Significant ethical issues there. If a relationship is in the process of breaking down then both parties are likely to b...

6 days 10 hours ago

It's not licensees not putting them on, it's small businesses (that are licensed) that cannot afford to put them on. The...

1 week 6 days ago

So we are now underwriting criminal scams?...

6 months 2 weeks ago

After last month’s surprise hold, the Reserve Bank of Australia has announced its latest interest rate decision....

1 week 1 day ago

Libby Roy has been appointed as an independent non-executive director on the board of AZ NGA....

4 weeks 1 day ago

A professional year supervisor has been banned for five years after advice provided by his provisional relevant provider was deemed to be inappropriate, the first time th...

3 weeks ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
74.26 3 y p.a(%)
3