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Listed investment trust resonates with SMSFs

Forager Funds Management’s flagship listed investment trust (LIT), the Australian Shares Fund, commenced trading on the Australian Securities Exchange (ASX) last Friday at a market cap of $138 million, with more than half of its units held by SMSFs.

Like other closed-end structures, such as a listed investment company, the number of units on issue in the LIT was fixed, meaning the fund would not be required to set aside liquidity to meet any potential redemption requests, Forager said.

One of Australia’s few LITs, the unique vehicle was selected due to its suitability for the fund’s style of investing and had captured the attention of SMSF investors, Forager chief investment officer Steve Johnson noted.

“More than half of the fund’s units are held by SMSFs. They are our main clients,” Johnson told selfmanagedsuper.

“The fund is only suitable for the long-term, growth portion of an SMSF portfolio.

“The investment approach is focused on capital gains from a fairly concentrated portfolio of stocks that Forager thinks are worth substantially more than their market value.”

He said a typical holding period was three to five years and the returns tended to be lumpy.

“Most of our SMSF clients are running a low-cost core portfolio, either with index funds or their own portfolio of blue chips, and then adding some exposure to the Forager fund with the aim of generating excess returns,” he said.

Forager has listed what it hopes to be one of the most investor-friendly vehicles in the listed fund space.

“We have no tenure in our management contract of this listed vehicle, there are no termination payments due if we are voted out as the investment manager, and as a manager, we have funded the cost of [Friday’s] listing exercise rather than asking investors to pay for it from fund assets,” Johnson said.

An indicative net asset valuation of the fund would be published daily prior to market open, starting today, in order to assist price discovery and to ensure the secondary market was as efficient as possible, he said.

“We don’t anticipate our investors to be anything other than long term in their outlook, but we do want to help them create an orderly and well-informed market when they want to transact on the ASX,” he noted.

As at 30 November, the Forager Australian Shares Fund had delivered investors 14.34 per cent growth over the previous 12 months and 20.37 per cent a year over five years.

The firm currently manages over $160 million in the Australian equities strategy and over $110 million in its international fund.

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