Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 458

LIC discounts widening with the market sell-off

Within the Listed Investment Company (LIC) and Listed Investment trust (LIT) sectors, premiums and discounts to Net Tangible Asset (NTA) values are reactive to market conditions, with negative sentiment usually exacerbating on the downside.

The MSCI All Country World and Growth indices are down 17% and 25% respectively YTD, creating opportunities in high quality managers trading at attractive prices in what appears to be a de-risking event. 

Discounts can vary significantly

In general, average sector discounts tend to be the widest during May before reverting to narrower levels over the second half of the calendar year. July is on average the best performing month for LIC/LITs when coupling the uplift to share price and asset backing.

Figure 1: July on average is a standout month for LICs & LITs

Source: company reports, IRESS, Bell Potter. From March 2007 to March 2022.

Some well known managers are now trading at wide discounts to NTA, beyond their long term 'normal' levels. Investor support has waned as markets have fallen and their share prices have dropped more than the value of the underlying assets. 

Figure 2: Widest indicative discounts

Source: company reports, IRESS, Bell Potter.

As shown in Figure 3 below, the equal-weighted sector discount now stands at 6.8% based on our indicative figures. Purchasing at these levels has the potential to add further accretion when accounting for the normalisation effect after market dislocations.

Figure 3: Discounts are reactive to the market

Source: company reports, IRESS, Bell Potter. As at 13 May 2022.

Add to this the fact that net inflows into Australian open-ended funds (ETFs) are decreasing, where retail investors tend to mistime the market. Discounts on alternative asset exposures with the potential to weather a stagflation situation are still yet to tighten.

Figure 4: Net flows into Australian open-ended funds are trending down

Source: ASX, Cboe (Chi-X), Bell Potter.

A note on indicative NTA calculations. They work best with LICs that have a high percentage of investments concentrated in its Top 20, regular disclosure of the Top 20 holdings, lower turnover of investments, regular disclosure of its cash position and the absence of a performance fee. 

For more detailed tables on a wide range of LICs and LITs, including current discounts and premiums compared with longer-term averages, see the latest reports in the Firstlinks Education Centre.

 

Hayden Nicholson is an ETF/LIC Specialist at Bell Potter Securities. This article and attached documents have been prepared without consideration of any specific investment objectives and is general information only based on prices at time of writing. 

 

RELATED ARTICLES

How can the worst feature of LICs also be the best?

Why LICs may be close to bottoming

The fascinating battle between Nick Bolton and Magellan

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Latest Updates

Superannuation

Super crosses the retirement Rubicon

Australia's superannuation system faces a 'Rubicon' moment, a turning point where the focus is shifting from accumulation phase to retirement readiness, but unfortunately, many funds are not rising to the challenge.

Economy

Should Australia follow Trump's new brand of capitalism?

A new brand of capitalism may be emerging - one where governments take equity in private companies. Is it state overreach, or a smarter way to fund public goods without raising taxes?

Gold

Why gold may keep rising - and what could stop it

Central banks are buying, Asia’s investing, and gold’s going digital. The World Gold Council CEO reveals the structural shifts transforming the gold market - and the one economic wildcard that could change everything. 

Investment strategies

Fact, fiction and fission: The future of nuclear energy

Nuclear power is back in the spotlight, including in Australia. For investors exploring the sector, here are four key factors to consider in this evolving energy landscape. 

Taxation

The myth of Australia’s high corporate tax rate

Australia’s corporate tax rate is widely seen as a growth-killing burden. But for most local investors, it’s a mirage - erased by dividend imputation. So why is it still shaping national policy? 

Taxation

Should we change the company tax rate?

The headline 30% corporate tax rate masks a complex system of dividend imputation and franking credits that ensures Australian shareholders are taxed only once, challenging traditional measures of tax competitiveness. 

Investing

Noise cancelling for investors

A lot of the information at an investor's fingertips today has little long-term value. The modern investing greats are not united by access to faster information, but by their ability to filter out what doesn’t matter.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.