Listed investment companies (LICs) are very similar to exchange-traded funds (ETFs), or real estate investment trusts (REITs). In every case there is a standalone fund dedicated to a specific purpose. For example, the Charter Hall Retail REIT (ASX: CQR) is dedicated to convenience retail centres, including petrol stations. An example ETF would be the Magellan Global Equities Fund (ASX: MGE). This invests in 20 to 40 of the worlds largest companies.
However, the difference between a REIT or ETF and an ASX LIC is the structure of the business. LICs are generally limited companies, while ETFs and REITs are explicitly trusts. There are a range of differences but for me the most important is that a LIC is like any other company. Therefore, you buy shares not units. Meaning, you buy a part of the company rather than a unit in the underlying assets.
Hearts and Minds Investments Ltd (ASX: HM1)
Hearts and Minds is a great ASX LIC which listed during 2019. The fund managers forgo all fees, instead donating to leading Australian medical institutes. It has a concentrated portfolio in 25-35 Australian and global securities. These are based on the highest conviction ideas from leading fund managers.
In year to date trading, Hearts and Minds is up by 6.71% despite the coronavirus market crash in March. The company achieved a growth of 7.2%, compared to 3.4% in the MSCI World Net Total Return Index (AUD).
This LIC is currently trading at less than its net tangible assets (NTA) value per share of $3.71.
Ophir High Conviction Fund (ASX: OPH)
The Ophir High Conviction fund provides shareholders with a concentrated fund on companies outside of the S&P/ASX 50 Index (ASX: XFL). The company’s investment philosophy is very fundamental. That is, a bottom up approach to identify under-valued ASX shares. Particularly those with existing and proven business models and large, or growing, addressable markets.
What originally attracted me to this ASX LIC is that both founders have all of their liquid investments here. In year to date trading, this ASX LIC’s share price is up by 21.69%. It is trading at a price to earnings ratio (P/E) of 11.08, and at a slight premium to its NTA per share of $2.98.
The Ophir LIC portfolio uses the S&P/ASX Mid Small Index (ASX: AXMSA) as a benchmark. In FY20 the LIC delivered a growth rate of 12.7% against a benchmark growth rate of -5.3%.
WCM Global Growth Ltd (ASX: WQG)
WCM Global is a $200 million ASX LIC with an estimated NTA per share of $1.48 at the time of writing. This LIC also focuses on fundamental company analysis. However, it places a lot of value in the organisation’s moat, or competitive advantages. In FY20, the LIC delivered a return of 17.6% for the year. Outperforming its benchmark MCSI All-Country World ex Australia Index by 12.9%.
This ASX LIC provides access to a range of giant global technology companies. For instance, it includes companies like Shopify Inc (NYSE:SHOP), Tencent Holdings Ltd (HKG: 0700), and Mercadolibre Inc (NYSE:MELI). At close of trading on Wednesday, this ASX LIC is selling for a P/E of 9.32.