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ETFs, LICs

Monash converts Australian equities LIC

Monash LIC ETMF

Monash Investors has restructured its Australian equities listed investment company into an exchange-traded managed fund.

Australian equities manager Monash Investors has restructured its long/short offering from being available via a listed investment company (LIC) to now being accessible as an exchange-traded managed fund (ETMF).

The conversion is an industry first and the new ETMF will operate as the Monash Absolute Active Trust, commencing trading on the Australian Securities Exchange (ASX) tomorrow under the MAAT ticker code.

“The unit trust structure is a better structure for investors. It has the protections and passes on all the income without being taxed. So whether it’s an ETF (exchange-traded fund) or an ETMF, it’s a structure that has been designed for investors rather than the LIC (listed investment company), which is a structure designed for businesses,” Monash Investors co-founder and portfolio manager Simon Shields said at a media briefing in Sydney today.

Apart from acknowledging an ETMF structure was more beneficial for investors, Shields cited certain negative characteristics inherent with its LIC from a funds management perspective that also triggered the move.

“We just felt it was besmirching us to be managing an LIC that was trading at a discount and we weren’t prepared to have this situation continue,” he noted.

He also noted the new ETMF will provide investors with lower manager fees compared to the LIC and will target a 6 per cent yield paid quarterly.

“MAAT will continue to offer the same investment philosophy as MA1 (LIC), namely predominantly long Australian equities, but also somewhat short, benchmark unaware, a concentrated portfolio of best ideas and a target of double-digit returns over the cycle,” he said.

“The approach is one of seeking absolute returns, rather than relative returns, through active management. It has been consistently successful over a period of nine years since inception.”

Since its inception nine years ago, Monash Investors has delivered an annual average return of 12.7 per cent.

The manager sought investor approval before converting its LIC into an ETMF, with 99.9 per cent of shareholders voting in favour of the move.

Monash Investors has been re-engaging with research houses in light of the restructure, with some updated ratings already established.

“SQM has put us on four out of five stars, which is superior, IRI has come out with a recommended [rating]. We’ve also [contacted] Lonsec and Zenith, but we don’t know what their ratings are yet,” he said.

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