Zenith's 2014 LIC Sector Review covers 44 LICs across Australian and global equities. Fourteen strategies achieved an 'approved' or higher rating, with only one achieving a 'highly recommended' status.
LICs have for many years been viewed as the "poor cousins" to managed funds, says Zenith senior investment analyst Dugald Higgins.
"Many [financial] advisers who often struggle with their propensity to trade away from underlying value," said Mr Higgins.
In reality, there are many quality LICs offering competitive returns with the benefit of high franking, according to Zenith.
"This can provide a compelling opportunity for dividend seekers as well as those searching for absolute returns, providing shares are not purchased at too high a premium," said the report.
"Several of the LICs provide access to investment portfolios which are operated by highly successful fund managers, who also offer access to the same strategy (and often portfolio) in a managed fund format” said Mr Higgins.
“The benefit of the LIC structure is that for the same strategy, it can increase franking and negate the impacts of capital flows to the investment portfolio from the applications and redemption process found in managed funds, enhancing the overall return experience,” he said.
