LIC and LITs rally along with market recovery


Angus Gluskie

At the end of March, a year on from the commencement of the market recovery, the Listed Investment Companies (LICs) and Listed Investment Trusts (LITs) sector had re-gained ~$13 billion in market capitalisation – an improvement of 32% over a year ago.

Angus Gluskie, Chairman of the Listed Investment Companies and Trusts Association (LICAT) and Managing Director of the longest running LIC Whitefield Limited noted that within the sector, Australian equities (up 35.3%) had kept pace with the broader All Ordinaries index, which advanced 35.8%.

“There is continuing interest from investors in the many benefits that the closed-ended structure of an LIC or LIT offers,” he said. “In the case of LICs, these include the ability for profits retained from previous periods to be returned to investors in future periods, providing a consistent and stable income over the medium to long term.”

“Investors who bought LICs/LITs when they were trading cheaply relative to asset backing in 2020 have been able to generate particularly high returns. Not only have they benefited from the upswing in the market value of shares generally, but they have also received a supplementary return as the LIC/LIT shares themselves returned to a more normal trading level relative to asset backing.”

Mr Gluskie noted that the income and yield sector of the LIC/LIT market were also performing well.

“In an economic environment where income and yield are hard to find, these LICs/LITs have continued to generate return and income for their underlying investors,” he said.

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 efficiency and stability of their closed-ended structure, coupled with the corporate governance disciplines of ASX listing have proven to be far more durable than many other investment structures.

“The combination of efficiency and stability of the closed-ended structure of both LICs and LITs are attractive to many investors in managing their portfolios,” Mr Gluskie concluded.

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