SMSF investors’ demand for listed investment companies on the up

One fund manager has reported SMSF demand for LICs (listed investment companies) has “lifted considerably” in the past 12 months.

 

According to Clime Asset Management, the role of “consistent” fully-franked dividends is seen as a major factor in the continued popularity of LICs.

The cost of LICs is also a contributing factor, Clime stated, as is the investment’s “closed-end structure”.

To illustrate, investors can buy or sell shares in the LIC itself rather than shares in its underlying fund. The LIC has a fixed pool of assets that only changes when it issues shares to raise capital or has dividend reinvestment or option plans, Clime said.

“LICs have permanent capital and therefore can invest against the market, [for example,] buy in a falling market,” said Clime’s director John Abernethy.

“Unit funds, on the other hand, are subject to inflows and outflows of capital, which affects their long-term returns. They tend to invest with the market unless they are managed on an absolute-return basis with an ability to hold cash.”

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