New challenges for LIC/LIT sector

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The end of the stamping fee exemption form the new financial year has presented a set of new challenges and opportunities for both listed investment companies (LICs) and listed investment trusts (LITs) as the sector wants to see a “defined, transparent and efficient method” to provide sound advice and for advisers to be fairly renumerated. 

The Government made a decision in May to remove listed invested investment entities from the stamping fee exemption provided to all other Australian Securities Exchange (ASX) listed companies, in a move which would seek to align the treatment of listed investment entities with unlisted investment funds and exchange traded funds (ETFs). 

However, according to the Listed Investment Company and Trust Association (LICAT), in doing so the move had created differential treatment between listed investment companies and trusts and all other ASX listed companies, including Australia real estate investment trusts (AREITs). 

LICAT’s chair, Angus Gluskie, said the LIC/LIT, stockbroking and advisory industry would be making adjustments to their processes and systems to accommodate the requirements of the new legislation. 

“Our industry would hope that as market conditions themselves stabilise, that a further range of LICs and LITs can be brought to market, in turn providing investors with a continued albeit gradual expansion of investment choice as well as the benefits provided by closed-ended investment vehicles,” he said. 

Gluskie also said the trading of LICATs at premiums or discounts to asset backing was a normal and important part of closed-end fund operation and was the mechanism by which the net demand of buyers and net supply by sellers may be matched-up. 

“At any point of time LICs and LITs will trade across a range of premiums and discounts to asset backing and those variations to asset backing will fluctuate over time. 

“Investors and advisers who are active in the LIC/LIT market understand this inherent characteristic of closed-end markets and will use premiums and discounts to enhance their returns where possible.” 

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