Investors have recognised that listed investment companies (LICs) and listed investment trusts (LITs) offer more than Australian equities, as there has been a strong growth in the number to LICs and LITs offering access to global equities and fixed income, according to the Listed Investment Companies and Trusts Association (LICAT).
While the value of Australian equity LICs grew from $30 billion to $32.5 billion (up 8%), the value of global equity LICs and LITs grew from $8.5 billion to $14 billion (up 65%) over the three-plus years from end 2017 to February this year to meet investor demand, the association said.
At end-February 2021, the shift from December 2017 saw:
- Australian equities accounted for 63% of LIC/LIT sector value, share down from 77%;
- Global equities were 28%, up from 21%; and
- Fixed income was 10%, up from 2% over the same period
“This changing dynamic provides investors with access to the closed-end structure of LIC/LITs over a broader range of asset classes, assisting with their asset-allocation and diversification strategies while delivering on the many benefits these structures offer,” LICAT’s chief executive, Ian Irvine, said.
Irvine also stressed that because of LITs’ closed-end structure, unlike open-ended exchange traded funds (ETFs) or managed funds, they had a fixed capital base and were not forced to sell assets to meet withdrawal requests or to make income payments, like other trust structures.
“LICs and LITs have been assisting investors in growing their wealth for nearly 100 years. Today, over 700,000 Australians invest in the LIC/LIT sector, according to LICAT.
“The combination of efficiency and stability of the closed end structure of both LICs and LITs can enhance the overall performance and reduce volatility in their portfolios,” Irvine said.