Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Register

27 November 2025

Home / 172

Insights into LICs trading at a discount

Research company Independent Investment Research (IIR) produces a monthly report on Listed Investment Companies, which Cuffelinks regularly publishes.

In addition to the usual updates on new issues and fund activity, it includes an extensive database on LICs covered in their research.

This week, there is a useful article on LICs trading at a discount to their Net Tangible Assets (NTA) value. This does not necessarily make them a 'buy', as explained by IIR:

"LICs can often trade at a discount for a prolonged period and there is no guarantee that share prices will eventually move towards NTA. Before buying LICs at a discount we need to understand why they are trading at a discount and the likely catalysts to move them closer to NTA."

Here is a sample. Despite some of the LICs being managed by prominent fund managers, for various reasons, some LICs fall out of favour.

For example, the portfolio of a LIC such as Flagship Investments (ASX:FSI) has outperformed its index but it has a long history of trading at a discount, in this case over 20%, partly due to its relatively small size (about $40 million). As IIR writes on FSI:

"Large-cap stocks account for around half the portfolio, with the rest split between mid, small and micro-cap stocks. The portfolio (pre-tax NAV plus dividends) has outperformed the ASX All Ordinaries Accumulation Index over one, three and five-year periods. Performance has been helped by exposure to the better performing small cap sector of the market. Tracking error is slightly higher than some of the large cap focused LICs but beta is below one. FSI was at a 21.5% discount to pre-tax NTA at 31 July 2016. This looks an attractive entry point, but the shares have historically traded at a large discount. If the company is able to sustain outperformance this may lead to a rerating over time."

There is no slow down in the number of LICs coming to the market, with total funds under management reaching the $30 billion level. Given there is now a choice of over 80 LICs, it's a segment of the market worth understanding.

 

Graham Hand is Editor of Cuffelinks. Disclosure: Graham is on the board of the Listed Investment Company, Absolute Equity Performance Fund Limited (ASX:AEG), and holds an investment in FSI. This article is general information and does not consider the circumstances of any individual.  

 

  •   8 September 2016
  • 1
  •      
  •   

RELATED ARTICLES

Why LICs may be close to bottoming

The fascinating battle between Nick Bolton and Magellan

Why LICs are closing and more should follow

Firstlinks is sponsored by:
banner

Most viewed in recent weeks

The growing debt burden of retiring Australians

More Australians are retiring with larger mortgages and less super. This paper explores how unlocking housing wealth can help ease the nation’s growing retirement cashflow crunch.

LICs vs ETFs – which perform best?

With investor sentiment shifting and ETFs surging ahead, we pit Australia’s biggest LICs against their ETF rivals to see which delivers better returns over the short and long term. The results are revealing.

Warren Buffett's final lesson

I’ve long seen Buffett as a flawed genius: a great investor though a man with shortcomings. With his final letter to Berkshire shareholders, I reflect on how my views of Buffett have changed and the legacy he leaves.

Family trusts: Are they still worth it?

Family trusts remain a core structure for wealth management, but rising ATO scrutiny and complex compliance raise questions about their ongoing value. Are the benefits still worth the administrative burden?

13 ways to save money on your tax - legally

Thoughtful tax planning is a cornerstone of successful investing. This highlights 13 legal ways that you can reduce tax, preserve capital, and enhance long-term wealth across super, property, and shares.

Why it’s time to ditch the retirement journey

Retirement isn’t a clean financial arc. Income shocks, health costs and family pressures hit at random, exposing the limits of age-based planning and the myth of a predictable “retirement journey".

Latest Updates

Weekly Editorial

Welcome to Firstlinks Edition 639

Thank you for the hundreds of responses to our Reader Survey and to maximise the sample size, we’re leaving it open until this Sunday. Here is an overview of the results so far.

  • 27 November 2025
Investment strategies

Where to hide in the ‘everything bubble’

It might not be quite an ‘everything bubble’ but there’s froth in many assets, not just US stocks, right now. It might be time to stress test your portfolio and consider assets that could offer you shelter if trouble is coming.

Investment strategies

The ultimate investing hack: dividend growth stocks

Investors often fall prey to ‘amygdala hijacks,’ letting emotion trump reason. By focusing on dividend-growth with stocks instead of volatile prices, you can steady your mindset and let compounding do the work. 

Investment strategies

CBA or global banks?

CBA’s recent pullback highlights single-stock risk. Global banks trade at lower P/Es with rising earnings and dividends, offering investors both income potential and long-term value beyond the local market.

Investment strategies

Global dividends rising, but Australia lags

Global dividend growth surged in the third quarter, with median growth of almost 6%. Australia was a notable exception as dividends fell, thanks to flagging mining company payouts.

Economy

I called inflation's rise and fall and here's what's next

In 2020, I warned that surging US money supply growth would spark inflation. By early 2023, I said US money supply was dropping dramatically and that meant inflation would decline. Here's what happens next.

Superannuation

Are excessive super funds giving Australia “Dutch Disease”?

The irony is profound: a system designed to secure Australians’ futures may be systematically dismantling the economic diversity necessary for long-term prosperity.

Investment strategies

Could your children pass the inheritance ‘stress test’?

You devote years of your life working, saving and investing, striving to build a legacy that will outlive you. Before any wealth moves to the next generation, here are six questions every parent should ask themselves.

Sponsors

Alliances

Site Map

About Firstlinks

© 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.