Monash exits troubled LIC structure

Monash Investors has restructured its listed investment company (LIC) Monash Absolute Investment Company into an exchange traded managed fund (ETMF), admitting it was a mistake to opt for the former structure.  

It would list today and be renamed as Monash Absolute Active Trust following shareholder approval. Actively managed, it had a yield target of 6% per annum and a management fee of 1.38% per annum.  

Opting for an ETMF would provide appropriate fair value liquidity as well as creating a pathway for greater funds under management, Monash said. 

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The original LIC was launched in 2016 and ‘within two years’, portfolio manager Simon Shields said the firm had realised its mistake and tried to adjust the structure. It would have been completed earlier but was delayed by a review by the Australian Securities and Investments Commission (ASIC) into the ETMF sector which was finalised in April 2020. 

“Within two years after listing, we felt it reflected badly on us as portfolio managers,” he said. 

“We had come from established fund managers and we felt it was besmirching to be running an LIC that was trading at a discount. It then took us three years to get to where we are now.” 

He said the original decision to set up an LIC had been prompted by financial advisers who were asking the firm for something listed as LICs were popular at the time.  

“There are lots of characteristics of LICs that were not obvious to us at the time such as tax and franking credit rules and they were hard to explain to clients,” he said. 

“We thought we understood them but we didn’t, we wouldn’t choose a LIC if we were setting it up now. 

“ETMFs are a better structure, has more protection and passes on income. ETMFs are designed for investors whereas LICs are designed for businesses.” 

The move comes as the exchange traded fund (ETF) industry saw growth in May, while LICs saw stagnation. 

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