Listed investment companies (LICs) and listed investment trusts (LITs) held steady in 2020 despite the economic impact of the COVID-19 pandemic, the Listed Investment Companies & Trusts Association (LICAT) has said.
According to LICAT, sector market capitalisation of LICs and LITs fell by just 0.6 per cent in 2020 to $52.8 billion, compared to the S&P/ASX 200 benchmark, which fell by 1.5 per cent during the same period.
LICAT chief executive Ian Irvine said: “As the sector enters its 98th year of continuous operation in Australia, it continues to provide retail investors and SMSF trustees with access to some of the largest and most cost-efficient actively managed investment entities in Australia.
“LICs and LITs also provide investors with benefits from their closed-end structure and active management style allowing managers to choose where and when to invest capital.
“This closed-end structural trait can be of particular benefit in times of volatility, such as those seen over the pandemic-affected months of 2020 where LIC/LIT managers have been free to make investment decisions purely on their merit rather than running with the momentum of the market.”
Irvine pointed out the complex economic environment facing investors during 2021 also highlighted the need for the “supply of steady long-term investment capital to businesses in return for a sound level of investment income”.
“Australia’s closed-end investment sector consisting of LICs and LITs continues to be one sector suited to contributing this capital to business on one hand while providing investors with both liquidity and income on the other,” he said.
Last year, LICAT acknowledged the significant difference the federal government’s ban on stamping fees relating to LICs and LITs would make and called on the industry to adapt effectively to the change.
