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

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

Tariffs are a smokescreen to Trump's real endgame

Behind market volatility and tariff threats lies a deeper strategy. Trump’s real goal isn’t trade reform but managing America's massive debts, preserving bond market confidence, and preparing for potential QE.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Getting rich vs staying rich

Strategies to get rich versus stay rich are markedly different. Here is a look at the five main ways to get rich, including through work, business, investing and luck, as well as those that preserve wealth.

Latest Updates

SMSF strategies

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Superannuation

The huge cost of super tax concessions

The current net annual cost of superannuation tax subsidies is around $40 billion, growing to more than $110 billion by 2060. These subsidies have always been bad policy, representing a waste of taxpayers' money.

Planning

How to avoid inheritance fights

Inspired by the papal conclave, this explores how families can avoid post-death drama through honest conversations, better planning, and trial runs - so there are no surprises when it really matters.

Superannuation

Super contribution splitting

Super contribution splitting allows couples to divide before-tax contributions to super between spouses, maximizing savings. It’s not for everyone, but in the right circumstances, it can be a smart strategy worth exploring.

Economy

Trump vs Powell: Who will blink first?

The US economy faces an unprecedented clash in leadership styles, but the President and Fed Chair could both take a lesson from the other. Not least because the fiscal and monetary authorities need to work together.

Gold

Credit cuts, rising risks, and the case for gold

Shares trade at steep valuations despite higher risks of a recession. Amid doubts that a 60/40 portfolio can still provide enough protection through times of market stress, gold's record shines bright.

Investment strategies

Buffett acolyte warns passive investors of mediocre future returns

While Chris Bloomstan doesn't have the track record of his hero, it's impressive nonetheless. And he's recently warned that today has uncanny resemblances to the 1990s tech bubble and US returns are likely to be disappointing.

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.