LIC’s unique access sparking appeal

Listed investment company (LIC) Monash Absolute Investment Company has received early interest from SMSFs due to its inclusion of inaccessible stocks, flexible strategy and absolute return focus.

“We’re giving people access to things that they couldn’t otherwise do for themselves,” Monash Investors co-founder and portfolio manager Simon Shields told selfmanagedsuper.

“We’re able to short shorts, as well as go long, we’ve got a small allocation to pre-IPO (initial public offering) stocks and we are stock size agnostic within the portfolio, so relative to the ASX 300, which is a market cap weighted index, our portfolio tends to have more small-cap companies and some of the companies we invest in lack analyst coverage.

“At the moment we don’t have any banks and resources are underrepresented, so these are all things that people are generally not getting access to by doing it themselves.

“These are very much [the appealing factors].”

Monash Investors last month launched the LIC in response to increased demand for professionally managed and directly held investments from SMSFs and financial advisers.

It has a similar but not identical portfolio to its long-short Australian equities managed fund, the Monash Absolute Investment Fund (MAIF), and will be managed using the same investment philosophy and process.

Shields said the new LIC was considerably different from those already in the marketplace, which was another factor behind the early demand.

“There are different types of LICs and we’re in the hedge fund space, which has limited capacity, and there aren’t many listed hedge funds in Australia,” he said.

“We’ve had a lot of meetings so far with interested people and applications are coming in, so it’s looking quite good.

“I think there’s a desire for objectives-based investing, which is what we’re providing; not merely to go up and down with the share market, but rather to try to achieve certain hurdles every time an investment is made. As a result, we’re getting quite a lot of interest.”

He revealed the SMSF activity and interest for the LIC so far had been adviser driven and he believed it would continue to be.

“Independent financial advisers (IFA) are a big part of what we do and the stockbrokers themselves have many IFA clients who have many SMSF clients,” he said.

“Ultimately the end investors are typically people with money to invest and SMSFs make up a very large part of that market.

“There’s no particular type of SMSF that we’re targeting; it’s something that they have to discuss with their financial adviser to determine whether it’s suitable for them.

“Many SMSFs prefer to invest on market and so that’s a key reason as to why we have a LIC version of our fund.”

Going forward, Monash Investors planned to increase its investor communications for the LIC, he said.

“We’ll have our heads down as we do our best to reliably grow our investors’ wealth,” he said.

“We need to get out and present and communicate with investors quite regularly once the company is listed.

“We’ve got clear objectives about what we’re trying to achieve with investors in terms of targeting a return over the cycle – our existing fund targets between 12 per cent and 15 per cent per annum after fees, without a loss of capital from 30 June to 30 June.

“That’s very appealing to people and we’ve been able to deliver that so far. We’re confident that the Monash Absolute Investment Company will do the same for investors.”

The LIC’s investment objectives are to achieve a targeted positive return over a five to seven-year investment cycle and to avoid a negative return each financial year.

Since inception to 31 January, the MAIF has returned 15.9 per cent a year after fees, outperforming the S&P/ASX 300 by 5.6 per cent a year, with materially lower volatility and lower drawdowns.

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