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Update on LIC developments

January’s update on LICs from Independent Investment Research (IIR) includes the reasoning behind recent suspensions of ratings for Hunter Hall and Contango MicroCap, three new funds entering the market, changes afoot for Century Australia plus the regular pricing and performance update.

IIR has suspended its rating for Hunter Hall Global Value (HHV) following the surprise resignation of its CIO. Although there is confidence in the remaining management team, any further loss of key personnel will have a negative impact. The two takeover offers that are in place add another level of uncertainty. HHV’s largest shareholder, Wilson Asset Management has also weighed in, recommending an equal-access share buy-back which has met with resistance.

The suspension of Contango MicroCap’s (CTN’s) rating was prompted by the unusual move to appoint an additional portfolio manager and rebrand away from the Contango name. IIR’s concerns lay with “the potential for differences in style and process to the existing manager”.

Three new ASX listings are detailed:

  • URB Investments Limited (URB) – is an urban renewal-themed investment company, which will invest in a range of assets, including property and infrastructure, focussing on urban renewal and regeneration.
  • The Switzer Dividend Growth Fund (SWTZ) – will be targeting consistent dividend and long-term capital growth by investing in high-yield Australian blue chips.
  • Fat Prophets Contrarian Fund – will consist of 15-25 international stocks, selected based on mispricings, plus a small element of short-term trading.

Century Australia (CYA) has recommended Wilson Asset Management’s restructure proposal, subject to an independent expert review. Shareholders are expected to vote on the proposal in early-March.

In the pricing and performance update, large cap focused LICs saw improved performance over the last quarter, but remained below index returns over the last 12 months. The current reporting season is also highlighting a trend for lower dividends. Small cap focused LICs performed strongly in the first half of 2016, but weakened in the second. This underperformance is expected to continue over the coming months. International focused LICs performed well on the back of a Trump-led US market rally, despite lower returns from emerging markets.

Access the full paper plus other LIC updates and reviews on our web page, Listed Investment Companies updates.

 

Leisa Bell is Assistant Editor at Cuffelinks.

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