Investments, LICs

PM Capital unveils LIC security with a difference

Investment manager PM Capital has launched a listed investment company (LIC) security offering access to global equities while including a unique feature allowing investors the ability to redeem their allocations at the value of the vehicle’s net tangible assets (NTA).

The PM Capital GO2025 is a wholly owned subsidiary of the manager’s Global Opportunities Fund LIC (PGF) giving individuals the opportunity to invest in portfolio tracking exchangeable redeemable securities (PTrackERS).

Individuals purchasing PTrackERS will gain exposure to the same investment portfolio as the PGF, which is made up of a concentrated mix of undervalued equities and other global securities, including those listed in Australia, with a seven-year investment horizon.

The maturity date for the securities is 30 June 2025, when investors can exchange their PTRackERS for PGF shares based on NTA at that date or redeem their PTRackERS at their NTA. Investors will also be able to sell their PTRackERS at any time on the Australian Securities Exchange (ASX).

“We wanted to provide a consistent path for investors to be able to diversify offshore but were faced with the challenge of how to do that if a LIC stock is trading at a discount or a premium because either new shareholders or existing shareholders get diluted,” PM Capital chief investment officer Paul Moore told selfmanagedsuper.

“So we spent a lot of time trying to work out how do we create a stable path for investors wanting to go offshore without anyone getting diluted and it was a really simple solution: you add the ability to redeem at a fixed point in time. We’ve chosen seven years because it ties in with our investment time horizon.

“But what it means is say market sentiment was negative in seven years’ time, because there is the ability to redeem, the share price would not be getting too far away from the NTA due to the arbitrage ability of people being able to come in and buy the securities, liquidate them and take the difference.

“So if you think about it, the closer you get to redemption, the more the security’s price will track toward the NTA.”

Moore pointed out PM Capital is expecting significant interest from SMSF members for the PTrackERS.

“If you look at PGF, we have a big chunk of the SMSF market and my holdings are in my SMSF,” he said.

Further, he suggested the PTrackERS are a good diversification vehicle for SMSFs, which tend to be overweight in Australian equities and property.

The offer to participate in the issuance of PTRackERS consists of an entitlement offer to existing PGF shareholders, a public offer and an offer to broking firms. All are currently open, with the entitlement offer closing on 8 August and the remaining offers closing on 10 August. The securities will commence trading on the ASX on 22 August.

“No one gets diluted during the offer period because we’re raising money at NTA. And for the new shareholders, we’re paying all of the upfront costs so they get 100 cents in the dollar right from the start, whereas with LICs it’s 97 cents in the dollar,” Moore said.

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