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LIC market continues to expand

The listed investment companies (LIC) sector reached a total market capitalisation of $28.8 billion as at 30 April 2016, according to the latest review from Zenith Investment Partners.

The research house’s “2016 Listed Investment Company Sector Review” revealed this was a slight increase from $27.8 billion the previous year, capping two years of very strong market growth, which saw market capitalisation grow by 38.5 per cent since April 2013.

An increase in LICs offering international exposure continued to provide diversity and market expansion but it was Australian LICs that continued to dominate by market capitalisation.

Zenith senior investment analyst Dugald Higgins said there continued to be a range of quality LICs that offered robust returns from skilled managers with the benefit of high franking.

“The sector has continued to evolve with an increasing number of strategies on offer which diversify away from the sector’s historical Australian equities/long-only focus,” Higgins said. 

Despite the potential benefits LICs provided in relation to robust dividends and franking levels as well as efficiencies from managing a closed pool of assets, Higgins warned investors to be vigilant.

“Investors should be wary of not overpaying for the privilege, with many LICs continuing to trade at strong premiums across the sector,” he said. 

A summary of the sector review showed out of 71 Australian and global LICs, two were rated highly recommended, nine were recommended and five were approved, while 54 were not rated.

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