Investments, LICs

Listed investment sector records bumper year

listed investment sector

The listed investment sector has increased in size by more than one-third in the past year on the back of strong markets and investor interest.

The size of the listed investment company (LIC) and listed investment trust (LIT) sector has increased by more than 30 per cent in the past year, driven by a rise in the value of investment portfolios and interest in listed investment vehicles.

The Listed Investment Companies and Trusts Association (LICAT) reported the market capitalisation for the LIC and LIT sector grew from $44.2 billion to $58.3 billion from June 2020 to June 2021, an increase of $14.1 billion or 32.1 per cent.

LICAT chief executive Ian Irvine said while two initial public offer capital raisings in June added $300 million in new capital to the sector, its underlying performance was already strong with an increase of 31.4 per cent over the past 12 months.

“This was driven by both the increasing value of investment portfolios and the share price of the LICs and LITs themselves,” Irvine said.

According to LICAT, the growth was strongest in the Australian equities part of the sector, which increased its market capitalisation by 34.8 per cent, from $27.1 billion to $36.5 billion.

Irvine noted the fixed income/yield segment of the sector also performed well, with its market capitalisation increasing 21.9 per cent, and fixed income LITs continued to pay unitholders regular monthly income.

“In an economic environment where income and yield are hard to find, these LITs have continued to generate returns and income for their underlying investors,” he said.

He said LICs and LITs continued to draw interest from investors who were attracted by the closed-end nature of the funds and the cost efficiency, management stability and focus on the long term they offered. He highlighted the ability for profits from previous periods to be returned to investors in future periods, creating a stable source of income.

”Investors who bought LICs/LITs when they were trading cheaply relative to asset backing in 2020 have been able to generate particularly high returns,” he said.

“Not only have they benefited from the upswing in the market value of shares generally, but they have also received a supplementary return as the LIC/LIT shares themselves returned to a more normal trading level relative to asset backing.”

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