LICs boosted by Coalition win

29 May 2019

A Coalition win has provided an extra boost for the listed investment companies (LICs) sector, according to Zenith Investment Partners.

Although Liberals managed to save a ‘retiree tax’, the sectors which has raised more than $11.7 billion dollars of new investor capital over the last five years would still need to provide answers to key issues such as how this would affect the search for yield would be affected.

Also, Zenith’s report “2019 Listed Investment Entities Sector Report” would examine whether LICs investing in Australian equities would remain attractive as an investment tool.

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Zenith’s head of property and listed strategies, Dugald Higgins, said: “Australian equities have traditionally been a high yield market. While driven in part by favourable taxation, when removing the impact of franking credits, Australian equities are still one of the highest yielding asset classes available in a liquid, easily diversifiable format.”

According to Higgins, when viewed from a structural perspective, the company structure of a LIC could have advantages when compared to the structures utilised by LITs due to the difference in taxation treatment.

Additionally, the increased popularity of other assets classes helped boost the usage of trust structures via LITs, Zenith said, which was a logical progression of a maturing listed investment market.

At the same time, Xenith said that despite favourable conditions for capital raising over the past several years, most managers of LICs and LITs emerging during that time were yet to experience operating listed vehicles in a bear market.

“Too many managers are ignoring aspects that can result in increased investor dissatisfaction when conditions get tough,” Higgins said.

“Those who construct and operate LICs and LITs should make use of all available tools to maximise market integrity and client satisfaction in their products. Issues which are seen as merely irritating in the good times can turn deadly for sentiment in the bad times.”

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