I think it’s only worth investing in active fund managers if you think they can beat the market after fees. The most obvious way to judge that is past performance.
Although past performance isn’t necessarily an indicator of future performance, outperforming is a good sign. If you think the current holdings can also beat the market, that’s another good sign.
Wilson Asset Management recently launched WAM Global Limited (ASX: WGB), which is the latest listed investment company (LIC), it focuses on small to mid-cap international growth shares.
The definition of ‘small’ is slightly different to small cap ASX shares when you’re looking at overseas shares – the market capitalisation is usually measured in billions not millions.
There are far more investment opportunities listed overseas than on the ASX. Australia only makes up about 2% of the total listed businesses.
WAM Capital Limited (ASX: WAM), the flagship WAM LIC, has been running for almost two decades. Since inception in 1999, WAM Capital has delivered returns of 17.5% per annum before fees and expenses. I’m not sure WAM Global will be able to match that return over the long-term, but the average return per annum over the past five years of 14.5% could be quite achievable.
Despite having a diverse portfolio with a market-beating investment manager, a discount to the underlying NTA is starting to open up. The current share price of $2.13 seems to suggest a 4% discount to the post-tax NTA reported at the end of September 2018.
It has many recognisable names in its top holdings including American Express, Hasbro and Reckitt Benckiser.
WAM Global also appears to be following the WAM mantra of keeping a large amount of cash on hand for protection and opportunities. At the end of September 2018, 33.6% of the portfolio was held as cash.
Over the long-term I think WAM Global could become one of the attractive dividend shares on the ASX and also deliver pleasing total returns. The share price may be lower than the listing price, but the NTA is higher – despite the market volatility.
If it continues to trade at a discount then I’ll likely add to my holding over time.
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Motley Fool contributor Tristan Harrison owns shares of WAMGLOBAL FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.