Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 195

Watch premiums and discounts in LICs

Independent Investment Research (IIR) has released its December Quarter 2016 review of the LIC sector, sometimes called Listed Managed Investments (LMI). A summary of the performance of the 34 LICs included in the Report is presented below. The full paper with more detailed coverage is available here. As this full review is of the previous quarter, investors should check latest prices which may have moved significantly.

Overall equities performance

For the December 2016 quarter, the S&P/ASX200 was up by 5.2% following the US market rally after Trump’s election. Large cap equities, and especially resources stocks, contributed most to this performance. Small caps, down 2.5% for the quarter, still managed an overall gain for the year of 13.2%. For the 12 months to December 2016, the S&P/ASX200 was up 11.8%.

LIC performance

IIR’s analysis uses two different measures. The first is total returns (share price gain or loss plus dividends) which represents the actual return received by shareholders from their investment. The second is pre-tax NTA plus dividends, which is better for evaluating manager performance.

Using this second metric, the best performing fund for the December quarter was Global Master Fund (ASX:GFL) with a 15.5% increase in portfolio value due to a strong share price performance of its core holding, Berkshire Hathaway. As the overall market performed well, so too did the majority of LICs included in the Review. However, some small cap LICs had negative returns.

If using the first metric, Westoz (ASX:WIC) was the best performer for the quarter with an 8.1% total return in share price and dividends due to its resources focus. This reduced the discount to pre-tax NTA from 16.8% at 30 September 2016 to 9.4% at 31 December 2016.

Premiums and discounts

As at 31 December 2016, 12 of the 34 LICs covered were trading at a premium to pre-tax NTA. The largest of these was Mirrabooka Investments (ASX:MIR) at 25.8%, followed by WAM Capital (ASX:WAM) and WAM Research (ASX:WAX), each at 20.7%.

At the other end of the scale, Global Master Fund (ASX:GFL) was trading at the largest discount to pre-tax NTA at 22.3%, widening from 15.8% as at 30 September 2016. Over the past three years, GFL’s discount has averaged 14.4%.

The table below shows the quarterly performance for each of the 34 funds as measured by both metrics mentioned above, along with their premium/discount to pre-tax NTA:

Leisa Bell is Assistant Editor at Cuffelinks.

5 Comments
Sceptical
March 23, 2017

Its kind of pointless to even reference the movement in the NTA as the investor into the LIC structure never receives that performance. The assumption that is made is the share price will move according to the movement in the NTA. But the real performance the investor receives is just the performance in the share price (what they bought it for and then what they sell it for/what it is currently trading at) + dividends. The structure itself is flawed and surely will be replaced with active ETFs if more providers come to market to offer choice!

Cat Daddy
March 23, 2017

Ashley.

What part did I miss. The article under sub heading LIC performance reads "(share price gain or loss plus dividends)"

Graham Hand
March 23, 2017

Hi CD, good pick up but we changed the previous wording after receiving Ashley's comment. We left his comment after the article as a way to explain one of the headings in the table, which we did not change.

Graeme
March 23, 2017

One should also be aware that LICs use a number of different ways are used to report their performance to their shareholders. While all LICs publish monthly a pre and post tax NTA, that's where commonality ceases.

At the conservative end of the spectrum, some managers report performance as change in post tax NTA adjusted for dividends paid. This is in my opinion the best measure of the change in value of the long term shareholder’s investment. Other managers will adjust this for tax paid and/or fees paid. Still others will use a portfolio return, again possibly adjusted for fees and taxes. I was surprised that the one year portfolio return (before taxes and fees in the fine print) of over 15% reported by one manager, equated to only a 2% increase in the after tax NTA adjusted for dividends paid.

Portfolio return is undoubtedly a useful method for comparison against a benchmark index, though one has to ensure the benchmark is appropriate. Why one dedicated microcap manager would benchmark against the All-ords index (primarily large banks, miners and retailers) beats me.

 

Leave a Comment:

RELATED ARTICLES

Listed Investment Company deals for 2019

Latest LIC and ETF updates

LIC reporting season wrap for 2017

banner

Most viewed in recent weeks

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

The hidden property empire of Australia’s politicians

With rising home prices and falling affordability, political leaders preach reform. But asset disclosures show many are heavily invested in property - raising doubts about whose interests housing policy really protects.

Latest Updates

Investment strategies

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Superannuation

Meg on SMSFs: Indexation of Division 296 tax isn't enough

Labor is reviewing the $3 million super tax's most contentious aspects: lack of indexation and the tax on unrealised gains. Those fighting for change shouldn’t just settle for indexation of the threshold.

Shares

Will ASX dividends rise over the next 12 months?

Market forecasts for ASX dividend yields are at a 30-year low amid fears about the economy and the capacity for banks and resource companies to pay higher dividends. This pessimism seems overdone.

Shares

Expensive market valuations may make sense

World share markets seem toppy at first glance, though digging deeper reveals important nuances. While the top 2% of stocks are pricey, they're also growing faster, and the remaining 98% are inexpensive versus history.

Fixed interest

The end of the strong US dollar cycle

The US dollar’s overvaluation, weaker fundamentals, and crowded positioning point to further downside. Diversifying into non-US equities and emerging market debt may offer opportunities for global investors.

Investment strategies

Today’s case for floating rate notes

Market volatility and uncertainty in 2025 prompt the need for a diversified portfolio. Floating Rate Notes offer stability, income, and protection against interest rate risks, making them a valuable investment option.

Strategy

Breaking down recent footy finals by the numbers

In a first, 2025 saw AFL and NRL minor premiers both go out in straight sets. AFL data suggests the pre-finals bye is weakening the stranglehold of top-4 sides more than ever before.

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.