Listed investment companies (LICs) have attracted some public attention recently in New Zealand and Australia. Investors considering LICs should take the time to research and understand such offerings, says global investment services firm, Russell Investment Group.
Russell Investment Group managing director Edward Schuck says that investors can easily avoid common pitfalls to help ensure their LIC lives up to expectations.
"There’s no question that some LICs have recently had a period of strong share price performance, but this has not always been the case historically," Schuck says.
"Judging actual performance of underlying investments is difficult for retail investors as the LIC’s share price performance is a combination of investment performance and market premium/discount."
Schuck says investors need to read the prospectus of these investments carefully and: make sure they understand how the managers are remunerated.
He says they also need to make sure there is an independent board. Also he warns investors off trying to stag the new issues. He says in some cases LICs will list at a premium, but that is not always the case.
Investors need to put their money in for the long-term, and be prepared to ride out periods where the LIC is trading at a discount to asset backing.For more detailed information on listed investment companies read these two stories in Features
Eight issues to consider when investing in an LIC. Why everyone wants a LIC
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