5 Factors For Profiting From ASX LIC Takeovers And Wind Ups

Cadence Capital Limited (ASX:CDM)– High conviction manager that chalked up a heap of alpha in one stock a long time ago. Recently this high conviction approach has come unstuck. Don’t think it has much protection to survive from the IMA. Questionable reporting of performance at times.

NAOS Small Cap Opportunities Company Ltd (ASX:NSC) – Poor performance, manager has other LICs that are managed in a similar way, highly disgruntled shareholder base. Some issues are refinancing some debt soon and a break fee in a rather long IMA still. Controversy in the way it handled the takeover of CTN.

In fairness I should note NAOS has seen a nice bounce in performance for them across August / September. Despite that the discount remained large even after they announced this. Perhaps one day some sort of merger between their LICs will be considered.

Ellerston Global Investments Ltd (ASX:EGI) – I think the manager here has done an ok job, although one criticism is the way they handle underwriting of options in the past. Despite all this it trades at a large discount, is more than halfway through a 10 year IMA, and I believe activists are looking at it.

Morphic Ethical Equities Fund Ltd (ASX:MEC) – Was a poor IPO structure in terms of size, listing costs, free options etc. Has underperformed the market since listing. Question marks over being able to add value from ETFs within the portfolio / making macro calls. It is earlier within its IMA though so may take awhile before change is suggested. Will be challenging for it to survive in the current form in the longer term. Dilutive share issuance hasn’t helped its relationship with a lot of the shareholders. Have seen changes in the ownership structure of the fund manager.

Ok so perhaps I wont be on the Christmas card mailing list for some of these LICs, but readers feel free to comment on the blog post if you think I am being unfair with some of the above observations. And as I said earlier, to discuss other LICs aside from the above that may struggle to survive longer term.

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Disclosure: At the time of writing, I own the following LICs from the above list – ALF, TGG & BAF.

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