Ethical LIC will appeal to SMSFs

Ethically screened listed investment company (LIC) Morphic Ethical Equities Fund, the first launched in over a decade, is expected to align well with SMSF investors’ growing desire for environmental, social and corporate governance, and responsible investing.

“There’s been a lot of interest and from SMSFs there are some who want an ethical screen, so it was a question of whether an LIC is the right vehicle and I believe it is because the LIC structure gives great alignment between investors and managers,” Morphic Asset Management managing director Jack Lowenstein told selfmanagedsuper.

“Unlike unit trust managers, the only way we can grow our business is through generating great absolute performance.

“Also, because we don’t have to worry about redemption risk, we can take a longer-term view. This generally benefits investors.”

Lowenstein added there was a pervasive myth in Australia that ethical funds must, by their nature, underperform normal funds.

“Everywhere else in the world ethically screened funds are growing fast. In Australia, not so much; it’s less than 1 per cent,” he said.

“We also believe that our personal track record in running ethical funds in the sadly now dying Hunter Hall speaks for itself.

“One further point is that most SMSFs are woefully underweight with global equities anyway, so we believe we invest globally in a very risk-controlled way.”

Other than the application of the ethical screen, Morphic will employ a similar investment process and strategy for the LIC that it currently uses in managing its Global Opportunities Fund, which has earned investors a compound annualised return of 17.3 per cent since inception in August 2012.

Earlier this month, Morphic lodged its prospectus for the LIC with the Australian Securities and Investments Commission.

The initial public offering (IPO) formally opened on 14 March.

Westpac fund incubation business Ascalon Capital Managers, which owns one-third of Morphic, will invest $5 million in the IPO.

In addition, LIC pioneer Geoff Wilson will invest $1.1 million and will introduce the new LIC to shareholders in the Wilson Asset Management LIC stable.
The IPO is seeking to raise up to $220 million and can accept oversubscriptions for a further $55 million.

The offer period is expected to close on 19 April, with trading on the Australian Securities Exchange expected to start on 3 May.

Morphic has a long-standing commitment to charitable giving and will be donating 2.5 per cent of its management fees from the LIC to charity.

Lowenstein played a leading role in building one of Australia’s premier ethical investment managers, Hunter Hall, and took part in the launch of Australia’s only previously ethically screened LIC, Hunter Hall Global Value.

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