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Here is my medium / long term ASX LIC performance comparison of the most popular LICs against relevant ASX index ETFs.

Some years ago, I set up a sharesight portfolio of a lot of the large, popular ASX LICs to see at a glance how their performance looked in terms of total shareholder return. Those wanting to go back and look at ASX LIC performance comparisons for 2022 or ASX LIC performance on a longer term timeframe to 2023 can click on those links respectively.

One important point to note about this is that it will include any movements in the discount / premium to NTA in the numbers. The longer time frame we view the results though (this time over 5 years), this factor should become less material to the numbers.

I got tired of ASX LICs presenting their own performance numbers. They can exclude all management fees and expenses, effects of dilutive capital raisings as they please. They can gross up returns for franking if they feel like it. They can choose whatever benchmark they feel like.

If after all of the above they still think the numbers look bad, they can simply not provide them. Instead, just put some slide showing they paid some good dividends over the last year or two.

All that is needed is an asterisk or 2,3,4,5 plus asterisks!, and fine print that I struggle to read with a magnifying glass detailing the various exclusions.

To clarify, I didn’t examine every LIC. I simply looked up all ASX LICs in the equity space from a list a few years ago and used those above $500 million at the time. After all, the LICs keep telling us they need to issue more shares because increased awareness, lower fixed cost ratio, and better liquidity of the LIC is a positive ingredient for success. Hence screening for the larger LICs like this should produce better results and see no excuses, right?

I used Sharesight to create some trades assuming I bought the securities on the last day in 2018. Therefore my performance table here is simply total shareholder return. As sharesight users may be familiar with, it displays returns including benefit of grossed up dividends in terms of franking.

UNDERVALUED ASX STOCKS 2024

Another reason I thought a simple table like this might be interesting, is that some investors like to start their searches for undervalued stocks by seeing what stocks have been poor over the last few years. There are more than a few in that camp in the table as you will see further down. Whilst sometimes you can back a winner going with a contrarian view like that, I am not sure whether that’s necessarily a good strategy here.

ARE LICs BETTER THAN ETFs?

I am no financial advisor, so I am not drawing any conclusions here. There are some LICs on the list that have performed extremely well, and various ones have done a lot worse. The point of the blog post is to highlight information that often gets overlooked. Some fund managers choose to express performance before the effect of large fees, and may choose not to disclose performance data, and not include performance of index ETFs as a comparison. At least the methods I am using here are to compare in a like for like manner.

BEST ASX LISTED INVESTMENT COMPANIES (LICs) 2024

So which ASX LICs performed best in the 5 years leading up to 2024? (with the caveat past performance in not indicative of future results!).

The following table coming up captures the performance of many of the most popular ASX Listed Investment Companies (LICs) for the 5 calendar years leading up to January 1, 2024.

Below is the table. I also included in the list popular ETFs. These are Vanguard Australian Shares Index ETF (ASX:VAS)  & Vanguard MSCI Index International Shares ETF (ASX:VGS) which might interest many in terms of doing a comparison.
 

LICs vs ETFs PERFORMANCE COMPARISON 2024

WHAT HAPPENED TO VGI PARTNERS?

The VGI Partners Global Investments (ASX:VG1) ASX LIC stands out on the list for unfortunate reasons. With such poor performance, we saw in 2023 that founder Rob Luciano had resigned from VGI Partners from his role as Chief Investment Officer.

This followed a 6-month sabbatical in 2023, that came after the previous year saw VGI Partners merge with Phil King’s Regal Funds Management.

It also was not the only resignation we have seen at VGI Partners in recent times. At least 5 key investment staff have been reported to leave within the last few years or so. It makes it currently challenging to recognize the current VG1 ASX LIC from how it looked in the initial prospectus. Back in 2017 there was quite a different investment team. It set out amongst other strategies to pursue superior risk adjusted returns without a primary objective of high dividends, and to actively manage currency exposures. Even the top portfolio positions have quite a different feel to how they looked through 2022. IMA terms of a decade can feel like a long time when significant changes are seen.

Perhaps some of the previous staff wondered whether the company still fulfills the IMA, given all these changes? Plus changes to the overall investment strategy it seems. I also note that turnover of the portfolio is dramatically different in the last year to how it used to be. A bit stiff for those that relied on the prospectus.

It gets even more awkward. VGI co-founder and one of the recent departures Doug Tynan mentioned above happened to start up his own shop and another former VGI staff member in Justin Hardwick is also involved. Their performance to November 30 I just looked up was wait for it… plus 39 % the previous 12 months, and overall, since the inception date not that long ago in July 2022 their fund is up 51%!

WHY IS THE WAM SHARE PRICE DROPPING?

Another ASX LIC on the list that has seen its performance disappoint has been WAM Capital Limited (ASX:WAM). Its share price fell in 2023 as it struggles to grow strongly after paying out high dividends. In part due to some pressure of the premium to NTA deflating at times, 5-year shareholder returns are amongst the lower funds on the above list.

WAM GLOBAL AGM REMUNERATION STRIKE

The WAM international product has also struggled at times. WAM Global Limited (ASX:WGB) received yet another first strike on its remuneration report in 2023. The AGM results at WGB made for interesting reading. I have read countless articles about ASX companies getting strikes this AGM season. I have read countless articles about other LICs that have not done well such as VGI Partners, but can’t locate anything at this point on the WAM Global AGM strike etc.

In fact, the consistent “strikes” recorded at the WAM Global AGMs in the last few years have been kept so quiet that the company itself seemed to “forget” about them!

The possibility of a second strike in 2022 should have been accompanied by a conditional spill resolution. One would think an activist investor like WAM Capital should be all over details like that.

It took them almost 2 weeks to correct this little oversight, when they then released the addendum to notice of AGM announcement.

By the way, the 2022 WAM Global AGM results also make for interesting reading, almost hard to get your head around.

BEST PERFORMING ASX LICs 2024

I should not only focus on some of the poor performing ones above of course. Credit where it’s due, performance from the likes of the L1 Long Short Fund Ltd (ASX:LSF) and the PM Capital Global Opportunities Fund Ltd (ASX:PGF) has been quite impressive. In 2023 these ASX LICs traded at a premium to NTA at various times, quite a rarity.

In years gone by WAM Capital has used its premium to NTA to acquire underperforming LICs that trade at a large discount such as the PM Capital Asian Opportunities Fund as one of many examples. Some have already speculated whether the likes of PM Capital or L1 Capital trading at a premium to NTA should try and acquire under performers at a discount such as VGI Partners Global Investments (ASX:VG1).

It would also be ironic therefore if WAM Global Limited (ASX:WGB) one day found itself subject to pressure to be wound up, taken over, or convert to open ended.

SHARESIGHT REVIEW OF ASX LICs FOR 2024

Also whilst sharesight does a great job in producing the numbers, it does require my input initially, please be open to the possibility of errors! Another reason not to draw conclusions here and rely on this to make any decisions!

WHY ARE SO MANY ASX LICs CLOSING?

I shall come back to a quote I made on this blog many years ago and link to it further down. Firstly the quote, “Unfortunately on the ASX now we still have many newer LICs that began in the last few years. This means they are often less than half way through a 10 year IMA term. Getting back to the old CEF study I have been referring to, we can point to some significant liquidation events occurring around the GFC in Australia. The approximate numbers I remember is that the LIC universe consisted of about 60 leading up to the GFC. Nearly a third of them somehow disappeared over the following few years. Yet as I write today we have easily more than 100! I suspect when a lot of these IMA terms expire, we may well lose about a quarter of the LICs that exist today.”

Basically, we should not have been surprised that 2023 saw many high profile ASX LICs / LITs move to shut down or convert to open ended unlisted funds. I touched on the Magellan and Forager changes in this recent blog post.  This has been a similar theme and pattern that emerges many times over several decades.

My comments a few years back about suggesting the number of ASX LICs might be reduced by about a quarter is not necessarily a smart prediction. I suspect as the 2020s draws to a close that it will prove to be a significant underestimation. In the recent chairman’s address from WAM Research (ASX:WAX), they noted that already we have seen 24 LICs and LITs depart the sector since it peaked at 114 in 2018.

ARE CLOSED-END FUNDS A GOOD INVESTMENT FOR 2024?

My quote above by the way came from my article about the predictable pattern of Closed End Funds trading from IPO stage to de-lisiting here. Like always, the answer to the above question is likely to be more dependent on how an investor capitalizes on this pattern.

One though can at least say that towards the end of 2023, discounts on closed end funds whether it be Australia, US or UK were historically wide and attracting attention from global hedge funds. That is more simply a fact rather than a prediction, maybe discounts get wider?!

DOES SHAREHOLDER ACTIVISM WORK?

To benefit from a closed end fund discount narrowing due to shareholder activism, ideally there needs to be plenty of activist investors willing to try and make that happen. Some of the returns of such dedicated activist funds have disappointed of late. In my last blog post I addressed some of such performance numbers, and tried to answer the above question of whether shareholder activism still works.

Once can see from my article there, that there a quite a few dedicated activist funds that will be hungry for a win on an activist campaign in 2024 to hopefully boost their investment returns.

ARE ASX LICs A GOOD INVESTMENT?

The objective here is to present the factual performance numbers here that often get buried into the background / hidden, and the reader can draw their own conclusions.

It is a complicated matter, since performance numbers displayed in the industry are not standardized across the board.

Without spending too much time in this particular blog post in going down the rabbit hole of ASX LIC performance reporting, I thought it is easier to link to a couple of previous articles below. Therefore those that wish to drill down and explore that area, refer to the below posts in previous years.

Playing Games with LIC Performance Reporting. – Value Investing for a living

Should I Invest In ASX LICs Vs Managed Funds? – Value Investing for a living

All the best for your investing in 2024!

More By This Author:

Does Shareholder Activism Work?
Australian stock: Contango Income (WCM Global L/S) & WAM Capital Selective buyback
Should I Buy ASX Shares Now?