Listed Investment Companies (LICs)

If you’re new to LICs (Listed Investment Companies) or interested in investing with one, Global Master’s Fund is here to assist you every step of the way. Before you make your investment decision, it’s important to understand what LICs are and how they work.

What is an LIC?

Unlike other businesses, the core function of LICs is to invest. They are listed on the ASX and offer a unique opportunity whereby their sole purpose is to promote investment across various stocks. To invest with an LIC, the investor would purchase equity in the company. That equity — which is managed by a specialist management team — can then be sold across various stock exchanges.

LICs are closed-ended, meaning they experience some restrictions with respect to the number of shares they can make or cancel. While this may seem like a limitation, it means that we are able to protect our investors during times of high demand.

The Different Types of LICs

When considering investments in LICs, it’s essential to understand the different types available to suit your investment preferences. LICs can be categorised into four main groups, each offering unique opportunities:

• Australian Shares: This category focuses on equity investments in domestic companies listed on the Australian stock exchange. By investing in LICs that specialise in Australian shares, you gain exposure to the local market and the potential for capital appreciation from a diverse range of industries and sectors.
• International Shares: LICs specialising in international shares provide investors with the opportunity to diversify their portfolios by investing in equity securities of offshore companies. This category allows you to access global markets and participate in the growth potential of companies located outside of Australia.
• Private Equity Funds: LICs in the private equity category offer investors the chance to invest in unlisted companies that are not publicly traded on stock exchanges. These LICs focus on providing capital to private businesses, often in the form of equity investments. Private equity LICs can offer unique opportunities for investors to access potential high-growth companies before they go public.
• Specialist Funds: The specialist funds category includes LICs that focus on specific industry sectors or investment themes. These LICs concentrate their investments in a particular sector, such as technology, healthcare, renewable energy, or real estate. By investing in specialist funds, you have the opportunity to align your investment strategy with specific sectors or themes that you believe have significant growth potential.

Is an LIC right for me?

When evaluating whether an LIC (Listed Investment Company) is the right investment choice for you, there are several key factors to consider. Taking these factors into account will help you make an informed decision that aligns with your investment objectives and risk appetite.

1. What you are investing in:
   • Understand the asset class the LIC focuses on, such as Australian shares, international shares, private equity, or specialist sectors.
2. Fund management and asset types:
   • Assess the track record and expertise of the management team.
   • Consider the types of assets held within the LIC’s portfolio for diversification and risk management.
3. LIC’s return goals:
   • Evaluate the LIC’s objectives, whether it aims for capital growth, income generation, or a combination of both.
   • Compare the LIC’s historical performance to relevant benchmarks.
4. Complementing or hindering your portfolio:
   • Assess how the LIC investment fits into your existing portfolio.
   • Consider if it introduces overlap or concentration in certain asset classes or sectors, and ensure it aligns with your diversification strategy.
5. Overall investment objectives:
   • Evaluate how the LIC aligns with your investment timeline, risk tolerance, and desired level of involvement.
   • Consider if the LIC’s management style and involvement match your preferences.

Taking these factors into account will help you make an informed decision about whether an LIC is suitable for your investment goals and aligns with your risk profile. Global Master’s Fund is available to provide further information and support as you navigate the decision-making process.