While those features are advantageous for investors, there are some downsides. An argument can also be made that a closed pool of capital can be more effectively invested for the long term without the concern of managing inflows and outflows. Trading LICs, though, tend to be more in line with the broader actively-managed market, at an average annual TCR of 1.29%.Īdditionally, LICs provide convenient access to a diversified portfolio through an ASX vehicle. The average annual total cost ratio, or TCR, for Traditional LICs is 0.29% compared with 1.13% for Morningstar’s Australian Equity Large Blend Category. Traditional LICs tend to be a low-cost entry point to an actively-managed investment, especially when compared with the broader actively-managed fund market. LICs provide investors with a few key benefits.
This cohort is dominated by the likes of Magellan Global Fund (ASX:MGF), with its AUM of $3.4 billion and WAM Capital (ASX:WAM) at $1.7 billion.įor the purposes of our analysis, we have defined Traditional LICs as those that account for investments on the capital account rather than on the revenue account. It also enables them to generate franking credits over and above those received from underlying portfolio holdings. This gives them the freedom to trade in and out of positions which provides greater scope to outperform a relevant benchmark and peers. Trading LICs forgo the CGT concessions available to traditional LICs, instead paying the company tax rate on trading profits. Trading LICs tend to be more actively managed, with higher average annual turnover. Traditional LICs, largely the domain of incumbents such as Australian Foundation Investment Company, or AFIC (ASX:AFI), with its $9.4 billion AUM, embody a long-term buy-and-hold ethos, which grants them the ability to pass on Capital Gains Tax, or CGT, concessions to investors.