Conditions perfect for more LIC floats

Conditions perfect for more LIC floats

As long as interest rates remain low, there will continue to be a high appetite for new LIC floats from yield-hungry SMSF investors, according to Independent Investment Research.


Speaking to InvestorDaily, Independent Investment Research analyst Peter Rae said the weight of money looking for higher yields is presenting an opportunity for fund managers to list product as an LIC.

Mr Rae pointed to Investors Mutual Limited's (IML) recent announcement that it intends to launch a new income-focused LIC.

IML investment director and founder Anton Tagliaferro has already secured commitments for the majority of the QV Income Fund IPO, which is aiming to raise close to $300 million.

The demand for more international product is also driving the listing of more IPOs, Mr Rae said.

The Antipodes Global Investment Company, which is due to start trading today, successfully raised $330 million in its IPO, he said.

A "reasonable proportion" of the Antipodes LIC is likely to have come from the SMSF sector, Mr Rae said.

"SMSFs are starting to realise that they have been underweight international equities, but it’s hard to know exactly what the international exposure is," he said.

One of the big trends in the larger cap LIC space is the move towards mid and smaller cap stocks in an effort to boost returns, Mr Rae said.

"Some of the bigger LICs that have had a historical focus on the large cap segment of the market have started to tilt their portfolios a bit more towards mid-to-smaller cap stocks where they think there might be some growth," he said.

Smaller cap LICs such as Wilson AM and Contango have done very well thanks to the outperformance of small cap stocks, he said.

"Whether the horse has bolted or not I don’t know. The four companies in the AFIC stable had their AGMs last week, and that was one of the themes that was coming out of their presentations," Mr Rae said.

"The banks' [share prices] are not going anywhere in a hurry. The resource sector’s had a good rebound, and the energy sector has falling dividends," he said.

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Conditions perfect for more LIC floats
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