LICs market landscape 2020

Published on
December 15, 2020
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LICs market landscape 2020

The $44 billion Listed Investment Companies (LICs) sector is now dwarfed by other comparative segments: Exchange Traded Products (ETPs), Managed Accounts and mFunds.

As recently as 2015, LICs had almost 50% more funds undermanagement (FUM) than ETPs and nearly triple that of managedaccounts, according to findings from RainmakerInformation's latest WholesaleAdvantage Report.

In the five years to 30 June 2020, LICs grew 12% p.a. Incomparison, ETPs grew 51% p.a., mFunds grew 71% p.a. and managedaccounts had the largest growth being 87% p.a.

LICs, unlike ETPs and mFunds, are structured as a company, not atrust. They are also a closed investment, so the pool of capitalheld in an LIC is capped.

"The LIC market is highly concentrated. The 20 largestLIC products hold more than half of all LIC market assets,"said Alex Dunnin, executive director of research at RainmakerInformation.

In the past few years LIC assets have shifted from Australianequities towards fixed interest.

"Fixed interest is becoming popular as investors,especially retirees, are desperate to get better yields than theyget from term deposits, and seek investments that generateincome."

Two-thirds of LIC assets are held in Australian equities, while27% is held in international equities, 10% in fixed interest andabout 1% in property and infrastructure.

LICs are a specialist product type and this has led to theperception that investmentmanagers tend to specialise in operating only LICs.

However, "LIC managers tend to specialise in a singleasset class, with only three of the 20 largest LIC managersoperating across multiple asset classes. Although, smaller andmedium scale managers were more likely to manage funds acrossclasses."

Analysis by RainmakerInformation shows that of the 76 investment managers operatingin the space, 71% are specialist LIC operators, while 29% arebroader investment managers that operate across a wider range ofproduct segments.

The largest LIC managers are AICS, Argo and Magellan with $8.36billion, $5.28 billion and $4.4 billion respectively.

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