SMSF demand for AFIC LIC continues

Australian Foundation Investment Company (AFIC) has said the long-term nature of its portfolio continues to attract SMSFs to its listed investment company (LIC) structure.

“There continues to be ongoing demand for AFIC from SMSFs given the simplicity of the listed structure, which provides easy access and liquidity, low management expense ratio at 0.13 per cent and, importantly, a return profile that is after tax and fees in the hands of the investor,” AFIC business development and investor relations general manager Geoff Driver told selfmanagedsuper.

“This includes a regular stream of fully franked income from a diverse portfolio of Australian equities. AFIC has over 120,000 shareholders.

“AFIC is a long-term investor.

“In the more volatile environment equities markets are likely to face in the medium term, given the change of administration in the United States and geopolitical issues, then the conservative long-term nature of the portfolio has an appeal to many SMSF trustees who are looking at similar investment time frames and like fully franked dividends.”

Driver’s comments come as AFIC posted a half-year profit of $118.3 million for the six months to 31 December 2016, down from $145.6 million in the previous corresponding period.

The fall was due to the decline in investment income received, primarily as a result of the significant cut in dividends across a broad range of large companies, including resources, energy and supermarkets, as operating conditions remained challenging in 2016.

The contribution from the trading portfolio and options was also down $9.7 million as the realised gains generated in the prior corresponding period were not repeated this half year.

The board has maintained the fully franked interim dividend of 10 cents per share, fully franked.

AFIC said the strength in the US market following the presidential election had also helped drive an increase in the broad Australian equity index to just over 5700 by the end of the calendar year.

“At current market levels it is difficult to find outstanding value,” AFIC managing director Ross Barker said today.

“We will continue to look for quality companies that can provide good long-term growth, including dividends, but will only do this at appropriate prices where reasonable value is on offer.

“In this context, we will be looking to any possible market pullback, which may arise from further interest rate rises in the US over the course of the year or heightened geopolitical tensions, as a way of adding to holdings at more reasonable prices.”

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