Although the overall market capitalisation for the listed investment company (LIC) and listed investment trust (LIT) sector dropped 2% to $44 million over 2019/20, against a 10.9% drop in the market capitalisation of the S&P/ASX200, the sector’s market cap went up 9.1% during the height of the COVID-19 pandemic, according to data from the Listed Investment Company and Trust Association (LICAT).
LICAT’s chair, Angus Gluskie, said that overall, the LIC and LIT sectors had weathered the recent difficult times well as it contained some of the largest actively-managed investment entities that could be accessed by retail investors in Australia. There were over 700,000 investors holding one or more LICs and/or LITs today, he said.
“Over the latter part of the 2019/20 financial year, LIC and LIT managers have been presented with some of the most challenging times in living memory following the fallout from a global health emergency and a turbulent time on financial markets,” he said.
According to Gluskie, closed-ended funds provided unique advantages to investors, the broader economy and the financial markets system, with LICs and LITs assisted investors in growing their wealth for nearly 100 years.
“The efficiency and stability of their closed-end structure coupled with the corporate governance disciplines of ASX listing have proven to be far more durable than many other investment structures,” he said.
According to Hayden Nicholson, LIC specialist at broker Bell Potter Securities, noted that the transition from 2019/20 was turbulent for LIC and LITs, but Australian equities also faced the same set of circumstances.
“We see this as a unique opportunity for fund managers, as many LICs/LITs begin to rebalance their portfolios and acquire financially strong securities at a lower investment cost,” he said.