Any thoughts on the new product currently being released to the market by WAM, Income Maximiser?
Like always (with most product providers) they have ambitious goals with the usual rider clauses saying that's their intent, but who knows.
The Company’s investment objectives are to:
• deliver a monthly income stream in the form of franked dividends;
• achieve capital growth over the medium-to-long term (more than five years); and
• preserve capital.
In Geoff Wilson's words:
Beyond meeting existing shareholder demand, the launch of WAM Income Maximiser addresses what we see as a critical gap in the Australian equity market, particularly where recent changes to abolish ‘bank hybrids’ have significantly reduced sources of franked income and an avenue of diversification for Australian investors.
The Target Income Return for WAM Income Maximiser is the RBA Cash Rate + 2.5% per annum, including franking credits. Based on current market conditions, the Company’s objective is to deliver an income return for Shareholders of over 6.0% per annum, including franking credits, through the cycle, with franked dividends to be paid monthly to Shareholders. Investors should be aware that the initial Target Income Return for franked dividends of over 6.0% per annum, including franking credits, is not expected to be achieved immediately. The Target Income Return is not a forecast, rather, it is an objective of the Company to be achieved over time once adequate profits reserves and franking credits have been established by the Company.
The Company has established this initial Target Income Return for franked dividends after considering factors such as the model portfolio developed by the Investment Manager in accordance with the Investment Strategy set out in Sections 4.1, 4.2 and 4.3. This is not intended to be a forecast, rather it is merely an objective of the Company. The Company may or may not be successful in meeting this objective. The Company will be seeking to be in a position to commence declaring and paying monthly dividends in August 2025, subject to the Company’s investment Portfolio performance and sufficient income being generated over that time, being three months after the Company’s initial public offering. Subsequent dividend payments will be made on a monthly basis, subject to the Company’s performance, available profits reserves, and other relevant capital management considerations.
WAM Income Maximiser will invest in what the Investment Manager believes is the capital of Australia’s highest quality companies – those with the ability to grow and sustain distributions over time, in the form of franked dividends and strong capital management. Together with these high-quality equities, we will invest in investment grade corporate notes and bonds, hybrids and short-term money market instruments, to provide stability to the investment Portfolio and cash flow for Shareholders. By actively managing a diversified investment Portfolio of equities (initially expected to be 60-70%) and corporate debt (initially expected to be 30-
40%), we will seek to provide a balance of income and capital growth to investors, with a focus on capital preservation. With this disciplined approach, we are positioning WAM Income Maximiser to deliver monthly franked dividends, while also achieving capital growth over the medium-to-long term (more than five years) with less risk.
Has anyone used the Motley Fool Everlasting Income Service (albeit there's currently a waiting list) and what has been the overall performance to date?
Just thinking it may be nice to have some form of franked income in my SMSF now it is in full pension mode and the franking credits are still fully refundable each year (until the Government messes with this option of course).
Any thoughts?
That's heaps funny @Rocketrod - I like their style. @DrPete I agree with you that the vast majority of ASX-listed LICs (& LITs) tend to trade at a discount to their NTA/NAV most if not all of the time, however a couple of the Wilson LICs tend to trade at premiums most of the time - including WAM, WAX and WMI, and WAM has underperformed WAX and WMI by a significant margin, partly because WAM, their flagship LIC (WAM Capital) holds all of the major positions that WAX (WAM Research) and WAA (WAM Active) hold and quite a few of the WMI (WAM Microcap) positions as well, in short WAM doesn't hold ANY companies not held in the other LICs, it just tends to hold much larger position sizes than the other LICs because it is a larger fund, and what has killed the WAM returns is that it holds companies from BOTH strategies, being Active (WAA) and Research-driven (WAX), and since Martin Hickson left Wilson Asset Management in late 2019 to become a portfolio manager (PM) @ Chris Stott's 1851 Capital, Wilson Asset Management's active strategy has underperformed their Research-driven strategy by a significant margin, so WAA has underperformed and WAM which holds the same companies as WAA (as well as the same companies that WAX holds and quite a few that WMI holds) has also underperformed WAX, WMI, WLE and WGB, and also underperformed their benchmark index, as pointed out in that Taxloss Substack that @Rocketrod linked to.
Chris Stott had previously been Wilson Asset Management's highly respected CIO before going out on his own, and grabbing a couple of his mates from Wilson's on the way out, or soon afterwards. Hickson had been very good at Wilson's "Active" strategy which seeks to capitalise on arbitrage opps, short-term market mispricing, etc., rather than their proven research driven strategy that Oscar Oberg does a decent job of. When Martin left in 2019 (to join Stott at 1851 Capital), Oberg took on the lead-PM responsibility for WAA in addition to WAX, WMI and WAM, so he is in charge of half of their 8 LICs, which is a lot, and it is little wonder that he couldn't outperform across both strategies. When Hickson was still there he was the lead PM of WAA (WAM Active) and the joint PM (with Oberg) of WAM Capital (WAM) and WAM Microcap (WMI) coz WAM Capital contains roughly a 50/50 split between Active and Research-driven strategy positions, and WMI also contained companies from both strategies, unlike WAX which is 100% Research-driven. That's how it used to be when I followed them more closely anyway, not sure if they've made changes to that mix since.
It's understandable that WAA has been trading at a discount to NTA because they have underperformed for years, and it's understandable that WAX trades - usually - at a premium to NTA because they have performed well and raised their dividends every year, as has WMI, but WAM has not, and their div's have been flat rather than growing due to their relative underperformance and very low profit reserve, so it is strange that WAM often also trades at a premium, when it is thoroughly undeserved.
Now that chart above is old data, granted, from mid-2023, but it is fairly typical actually, so I thought it was worth including.
Source: Bell Potter LIC Report, 1 September 2023 from: https://www.firstlinks.com.au/lics-closing-more-should-follow [20-Sep-2023]
Anyway, I used to participate in all of Wilson's early LIC IPOs and mostly did well out of them in the early years, but I declined to participate in the WAR IPO, and I'm very happy with that decision, and I'll be watching the performance of this new LIC for a while before contemplating buying in or not. WAR has underperformed, and this one might do the same.
Further Reading:
Strawman.com LIC discussion forum
Disclosure: Not holding any LICs or LITs (Listed Investment Companies/Trusts) currently except for WAM Global (WGB) which is both a value play and an income play, plus provides me with some much-needed global markets exposure. WGB's NTA was 269.17cps ($2.6917/share) before tax and 268.61cps ($2.6861/share) after tax at Feb 28th, and their share price was $2.42, now closer to $2.30/share. Good (above-market) fully franked dividend yield also.
This one's pretty funny too: https://taxloss.substack.com/p/wilsons-income-maximiser-maximising - particularly this headline:
WAR? What is it good for (absolutely nothing)
It sounds like @taxloss hasn't been a huge Geoff Wilson / WAM Funds fan for some time, and it seems that Geoff isn't a huge fan of @taxloss either - who posted this last year:
I think it's the fees.