LIC & LIT Listed Investment Companies (LICs) 2019

Discussion in 'Shares & Funds' started by Nodrog, 1st Jan, 2019.

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  1. Observer

    Observer Well-Known Member

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  2. Observer

    Observer Well-Known Member

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    Decided to bring forward the next LIC/ETF purchase because of the libs win and topped up AUI this morning. Feels good as the income stream continues to be building up.
     
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  3. dunno

    dunno Well-Known Member

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    I couldn't like it twice, so I'll bump it instead.

    It said it was post #999 in a thread that has been split many times. No doubt it will be lost over time which is a shame.

    Long live balance......
     
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  4. kierank

    kierank Well-Known Member

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    I just checked my seismographs. They all went off the Richter scale around 11pm and midnight on Saturday night :eek:.

    There was no warning and the damage was unbelievable :D.

    I am still investigating the cause. Looks like it might have been too much BS ;).
     
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  5. Nodrog

    Nodrog Well-Known Member

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    Hi @dunno, coming from one as knowledgible and highly respected as you that’s very much appreciated. It’s thanks to the likes of you, @The Falcon and others that I, even at an older age, have continued to learn and adapt when presented with proven knowledge, evidence and data etc. It’s not always easy admitting to one’s shortcomings and putting ego aside but it’s important to do so as the rewards are great.

    I think it would be a mistake if investors who were more heavily dependent on franking credits take the view that ok we’re fine now the Libs are back in, business as usual!
     
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  6. sfdoddsy

    sfdoddsy Well-Known Member

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    Interesting. How many often do the classic LICs include capital gain distributions?
     
  7. ChrisP73

    ChrisP73 Well-Known Member

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    Great question. I've asked this before too but didn't get any bites and could find a source...

    LIC capital gains [LIC & LIT]
     
  8. Snowball

    Snowball Well-Known Member

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    Not all that often. Sometimes is the technical answer.
     
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  9. SatayKing

    SatayKing Well-Known Member

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    As an addendum, it can depend on market conditions and the mandate of a particular LIC. An example could be MIR. Focus on ex-50 but market likes one of it's holdings which breaks into the 50's. No longer fits mandate so out it goes - maybe.

    Completely unreliable to even try and guess in my view. Take it when and if it comes.
     
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  10. Nodrog

    Nodrog Well-Known Member

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    LIC capital gain is often simply a result of active management. MIR being smaller cap focused (higher risk holdings) will have more turnover and resultant capital gains that large cap focused LICs. Hence like @SatayKing says you can’t anticipate when LIC CG distributions will occur. I never rely on them.

    Of course LIC CG is only available through low turnover LICs generally less than 10% pa. Hence there’s only a very small number of LICs that are allowed to do this under ATO rules.
     
  11. dunno

    dunno Well-Known Member

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    Only LIC’s classified as investors can pass on LIC Capital gains. The old school low turn over LIC’s are all eligible to distribute LIC Capital gains, the active trading style LIC’s are not eligible.

    Best to clarify LIC by LIC who is and isn’t eligible, especially those that sail close to the wind of being either or. Eligibility could change over time if LIC moves between Investing and trading designations.

    LIC capital gain works such that a shareholder of an investment LIC is treated exactly as if they had realised the capital gain in their own name. Ie the ability to claim a discount for holdings held for over 12 months is passed from the LIC to the individual. It is a specific piece of legislation put in place in 2001 to overcome one of the historical disadvantages of LIC’s where CGT discounts were lost to individuals who could otherwise claim in their own name.

    LIC’s that are eligible to distribute LIC Capital Gains will run a LIC Capital Gain account similar to a Franking Credit Account where they can accumulate credits to distribute as they sell long term holdings. Generally, they clear those accounts out fairly regularly as there is no advantage in not passing it on as soon as possible. (unlike franking account which are sometimes held back to smooth future fully franked dividends). Sometimes if there has been a lot of long-term capital gain realised in one period it may take several dividends to run the LIC Capital Gain down, they could also issue a special dividend to clear the account.

    So basically – If they sell a holding held for more than 12 Months you can pretty much expect to see the LIC Capital gain in the next dividend(s).

    Comparing pre and post NTA will give you an indication of how much unrealised gain each LIC has available to potentially realise – but what could be potentially realised and what is realised is two different things.

    Personally – the less capital gain realisation the better as far as I’m concerned. The LIC capital Gain is not a windfall. If it doesn’t make sense to be realising capital personally. It doesn’t make sense for your investment company to be realising it either. But if they have to sell because the investment doesn’t make sense any more at least you will get the CGT discount as if you held the investment in your own name.
     
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  12. Nodrog

    Nodrog Well-Known Member

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    +1. Important point that some LIC investors don’t seem to be aware of.
     
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  13. Realist35

    Realist35 Well-Known Member

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    Hey guys, would you please be able to explain this to a complete rookie :).

    I am ready to purchase my LIC of choice again and from what it looks like MIR seems to be of best value. But what puzzles me is how safe is this LIC? It is not as old as other big LICs, it is significantly smaller and then there is the key person risk.

    If i add to mir Id have around 15% invested in mir and 5% in qve.
     
  14. Froxy

    Froxy Well-Known Member

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    MIR is essentially the same management as AFI which is the biggest LIC and most well known on the ASX.

    Not sure on key person risk, whether AFI have a gun stock picker for mid caps, as their ex 50 holding is similar across MIR, AFI and AMH from what I can see but I imagine its relatively process, numbers driven so key person wouldnt be much of an issue.
     
  15. Nodrog

    Nodrog Well-Known Member

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    Extremely safe in my view. It’s a stable mate of decades old AFI.

    It’s small as they keep it that way given it’s investing in the smaller end of the market.

    No key person risk yet despite this it has performed similar or better than Wilson’s LICs. Then again Wilson charges much higher fees and transaction costs are much higher.
     
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  16. SatayKing

    SatayKing Well-Known Member

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    MIR.

    Staid, boring, conservative and shareholder focused.

    The above description could also apply to AFI, ARG, MLT and a number of other older LIC's as well.

    Possibly best sometimes not to overthink the deal. Decide if the management is OK by you, the discount/premium is OK by you, the yield (net of specials) is OK by you, the MER is OK by you, the price point for purchase is OK by you.

    Then do it, forget about it and get on with other more productive endeavors in you life.

    On the issue of being shareholder focused, I recently was required to take up an issue directly with one of the companies I have mentioned. It was resolved in my favour due to their intervention.
     
    Last edited: 24th May, 2019
  17. Realist35

    Realist35 Well-Known Member

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    Thanks guys. Just a couple of things I'd like to clarify:
    - When you say no key person risk, I assume this is because their investments are process driven. How can you tell/ measure this?
    - Satay, you mentioned I should decide whether management is ok by me. I assume what you meant by this is "do you agree with your money being invested in medium and small companies of their choice"?
     
  18. SatayKing

    SatayKing Well-Known Member

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    Yes in my view. My opinion, and others will have a different one, is once you have decided to invest the funds with a particular LIC you are outsourcing all the decision of making investments in companies to the management of the LIC. I consider it would also include the "how" the LIC invests. In the case of MIR this is the stated concept according to its web-site.

    How we Invest

    Whether or not this is acceptable is entirely up to the individual who intends to purchase shares in the LIC. I know it's not giving a definitive answer to the question but I don't believe it is possible to do so.

    I assume other LICs have similar statements but I haven't looked at them for a long time.
     
  19. Nodrog

    Nodrog Well-Known Member

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    Easier way is through research reports such as this if available:

    https://www.nracapital.com/sgxmas/listedmanagedinvestment11-12-2017 12-00-00 am.pdf

    In reality though I simply consider how long a LIC has been in operation, fees, performance, dividend policy and whether they treat shareholders well for example. Importantly also whether the LIC is reliant on some supposed hot shot stock picker whose always in the media. I can’t recall MIR ever promoting how wonderful their Fund is because so and so is doing the stock picking.
     
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  20. Observer

    Observer Well-Known Member

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    Thanks @dunno for such a great clarification!
     

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