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LICs, Portfolio Construction

Fund managers join hands for charitable LIC

Australian fund managers have come together to announce the opening of an initial public offering (IPO) for a new listed investment company (LIC) that offers investors global stocks and supports medical research institutes.

The company, Hearts and Minds Investments Limited, aims to provide investors with a concentrated portfolio of 25 stocks of the highest-conviction picks and stock ideas from the fund managers.

The LIC will donate 1.5 per cent a year, plus goods and services tax, of the average net tangible assets for the previous half-year to designated charities every six months.

The donation amount will accrue monthly and regardless of the performance of the company.

The corporate adviser for the offer, Seed Partnerships director William Spraggett, told selfmanagedsuper in relation to the broader LIC market, 40 per cent to 45 per cent of the primary market bids are coming from the SMSF channel.

Spraggett said he anticipates Hearts and Minds Investments will receive similar support from the SMSF channel.

“This product is geared towards global equities and that obviously does incorporate Australian stocks, but also will have a larger proportion of offshore equities,” he said.

“As you’re probably aware, Australia, not unlike many other countries, does have a very large domestic bias and doesn’t have massive exposure in international equities. So we do think there’s obviously a place for this style of product in most portfolios.”

The investment strategy will be based on the recommendations from two groups: core fund managers such as Magellan and Caledonia, and fund managers at the Sohn Hearts and Minds Investment Leaders Conference in 2017, where the idea originated.

With lead arrangers such as CommSec and nabtrade, Spraggett said SMSF investors will use those avenues to gain exposure to the investment.

The LIC will forgo investment fees and there will be no directors’ or committee fees.

The lead arranger and brokers for the IPO have waived broker management fees of 0.5 per cent of the total proceeds raised under the offer and will be paid a selling fee of 1.5 per cent of the application monies raised by the relevant lead arrangers or brokers to the offer.

The LIC, which aimed to raise $500 million, closed its general offer early following strong market support and is expected to start trading on the Australian Securities Exchange on 14 November under the code HM1.

Designated charities include the Victor Chang Cardiac Research Institute, Black Dog Institute and the Children’s Hospital at Westmead, Sydney.

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