20-July-2022: From @stevegreenycom and his site: Value Investing for a living – Focused on event driven, activist and deep value investing. Keen interest on closed end funds globally, more specifically Listed Investment Companies (LICs) on the ASX. [https://valueinvestingforaliving.com/]

https://valueinvestingforaliving.com/2022/07/20/asx-listed-investment-companies-lics-performance-fy-2022/#more-3352 [ASX Listed Investment Companies (LICs) Performance FY 2022]

As he says, LICs with market caps (fund sizes) under $500 million have been excluded, so these are the ones with some scale.

Not too many positive returns there, the best one is BKI with +8.64%, the worst is HM1 (Hearts and Minds) with -48.78%. No double digit positive returns for FY22 and 10 of them had negative double digit returns. Remember - these funds are run by full-time professional fund managers. Investing can be hard!

Click here for the full article.

Disclosure: Of those I only hold FGX and MGF currently IRL, although neither are in my Strawman portfolio. I have held others in prior years.

I haven't put anything much into this forum thread since I created it in 2020, so I thought I'd put in a link to a recent post of mine titled "GVF holds MGF" - which you can find here: https://strawman.com/reports/MGF/Bear77?view-straw=18830

If that instead goes to my valuation for MGF, which is out of date by the way, but doesn't need updating because the MGF website updates their NAV daily and their NAV is always my valuation for the company (or fund, it's a LIT - Listed Investment Trust), then scroll past that Valuation and the straw should be directly under it.

In that straw I discuss a number of LICs and LITs including MGF (the Magellan Global Fund), GVF (the Global Value Fund), WAR (WAM Strategic Value Fund), and some common reasons why closed end funds (CEFs) can often trade at significant discounts or premiums to their NTA (/NAV), with examples.

For people interested in managed funds that are closed-ended (CEFs) and can be bought on the ASX just like any other company can, there's a fair but of discussion in there about that, including why ASX-listed LICs and LITs who invest in companies that are listed OUTSIDE of Australia (globally focused funds) usually trade at discounts to their net tangible assets (or NTA).

If you have identified a segment of the market or an industry that you feel is relatively cheap compared to other areas of the market, and there is a managed fund that invests in that segment or industry - and you're happy with their holdings - and their management - and their track record - and they are available at a significant discount to their asset value, then that can be an option worth considering.

In a really good scenario, some of the underlying holdings within that fund can themselves be trading at market prices that are below their own net asset value (NAV) and it's those market prices that are used to determine the NTA or NAV of the fund that is holding those shares, so if you can then buy shares or units in that fund at a discount to THEIR NTA or NAV, then you're getting a double discount.

One obvious example of that is Sandon Capital (SNC), an activist fund that is a LIC, so closed ended, and they finished June at 69.6c/share, 13% below their June 30th NTA of 80c/share - see here: SNC-Net-Tangible-Assets-as-at-30-June-2022.PDF - and SNC hold some companies that were trading at June 30th at prices that were lower than their own net asset value. Now that does NOT necessarily make SNC a slam-dunk "can't lose" investment, because a number of their positions are trading at big discounts for good reason, and could very easily go lower still, like Nuix (NXL), which had another negative market update today and fell another -13% (I'll type up a straw on them in a minute). But if you actually like most of SNC's disclosed positions (at current prices), then buying SNC shares at a double digit discount to their NTA (which is based entirely on the market prices of their holdings, plus the $ value of their cash) might not be the worst idea in the world.

More about SNC here: https://strawman.com/reports/SNC

They do tend to always trade at a discount to their NTA just because of the types of companies that they hold, many of whom are probably at the riskier end of the spectrum - although that's very subjective - what looks risky to one investor might look like easy money to another. So you wouldn't buy SNC just to try to benefit from that discount narrowing, it's more about their high dividend yield, their large 26.5c/share "profit reserve" (the purpose of profit reserves is something I also discuss in that "GVF holds MGF" straw linked to at the top of this post) which underpins their future dividends for a number of years, and - hopefully - some NTA growth. As I say in my valuation for SNC (scroll down for the latest comments, the earlier ones are years old), they have thus far only been a good income play, because in share price terms they trade in a range that doesn't stray too far from the 95c/share levels they started at back in 2013. They've been up to $1.09 and down to 52c, and everywhere in between, and they're currently 71c/share. However, the example holds up in that IF most of their underlying holdings recover (in share price terms), that automatically drives up SNC's NTA, which, all other things being equal, should drag their share price up by around the same amount, so you get that uplift in that scenario, plus you've bought that exposure at a discount to asset value.

A simpler one to explain is MGF, a global fund (LIT) that is run by Magellan here in Australia and holds global leaders like Microsoft, Visa, Alphabet (Google), Mastercard, McDonald's, Yum! Brands (which includes KFC), Novartis, Reckitt Benckiser, Intercontinental Exchange and Nestle. Those were MGF's June 30 (2022) top 10 positions (in portfolio weighting order, from largest position) and those 10 represented 49.1% of their portfolio at June 30. MGF finished June at a 21% discount to their NAV. That discount has narrowed by a few percent in the past couple of weeks, but it's still closer to 20% than 10%. So MGF gives you exposure to some of the world's best companies, global leaders with strong tailwinds and very solid balance sheets, who can easily withstand a long period of difficult market conditions during which lesser companies could go to the wall. And that exposure comes at a discount. And they pay dividends (distributions) as well. That circa 20% discount to NAV is due to a number of reasons including recent underperformance vs their benchmark index (the MSCI World NTR Index) - over the past couple of years, but there are other factors at play also which I explore in that straw (link at the top).

The discounts that are often available is a feature of LICs and LITs which you do not usually get with open-ended funds such as ETFs or most unlisted managed funds.

Disclosure: I hold shares or units in MGF, GVF and SNC in various real life portfolios that I manage, and also here in my Strawman portfolio. I also hold shares in MFG, the manager of MGF, which is an entirely different investment proposition.

30-May-2020:  I thought I'd create this forum thread for general LIC/LIT news that isn't really suitable to be filed under just one single LIC or LIT.  I have been investing in LICs (and LITs too more recently) every since I began investing in Australian shares, and it's a sector I follow closely.

From Livewiremarkets.com today:  https://www.livewiremarkets.com/wires/big-discounts-on-offer-for-lic-investors