LICs

How Do LICs work?

A Listed Investment Company, or LIC is a specialised type of investment fund that pools together shareholders’ money and invests it under an approved investment strategy. LICs are listed and traded on the Australian Stock Exchange (ASX) and other securities exchanges around the world. Managed funds, exchange-traded funds and other pooled investment instruments are in several respects similar to LICs, but there are also some significant distinctions.

Why invest in a LIC?


There are many reasons why people invest in an LIC, but the most common are:

  • To achieve greater diversification in your portfolio of investments
  • Access to a competent investment manager’s expertise
  • To get a business, asset class or investment strategy exposure
  • To access the benefits of an unlisted managed fund with the ease of trading and liquidity of traded shares
  • To earn dividend or distribution profits
  • To gain from the NTA’s premium/discount shift relative to the share price

Benefits

The value of the LIC which increase overtime on the basis of factors such as the capacity of the manager, the performance of the underlying assets and the premium trading of its shares. By way of dividends, LIC dividends will distribute some of their earnings, often entirely franked. Diversification inherent As they usually invest in a diversified portfolio of stocks and/or other assets, LICs can help decrease your investment risk

Risk

Capital losses

The value of a LIC may decline due to factors including investment decisions made by the manager, the performance of underlying assets and its shares trading at discount.

Fees

LICs charge annual management fees which are taken out of the profits of the company regardless of performance, and in some cases may also charge performance fees.


Special Features of LICs

Listed On ASX


Listed Investment Companies (LICs) are ASX listed, subject to ASX supervision with shares bought and sold on the stock exchange.

Professional & Active Management


LICs are closed-end investments which are managed by professional fund managers who actively take tactical and strategic decisions towards achieving the fund’s investment objectives over the medium to long-term.

Diversification


LICs can assist with portfolio diversification across a scale of underlying asset classes, which can overcome risk and provide the opportunity to construct portfolios better to meet investor and SMSFs objectives.

Over 100 LICs now available 


There are round about 100 Listed Investment Companies (or LICs) available for investors to choose from on the Australian Stock Exchange. Since few years, there has been a growth, with several fund managers bringing new products to the market to attract more investors looking to utilise active management strategies to invest and diversify. 


Where do LICs invest?

Australian Shares

International Shares

Private Equity Funds

Specialist Funds

Investor Forum

Any advice provided by Laverne is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.