Investment manager Affluence Funds Management has opened its Affluence LIC Fund to new investment. The fund has a highly unusual mandate, investing in a portfolio of listed investment companies trading on the Australian Securities Exchange.
Since it was launched in May 2016 it has produced a return of 13.7 per cent, compared with 13 per cent return for the S&P/ASX 200 Accumulation Index over the same period.
The fund was set up to take advantage of opportunities in the LIC market, where a significant proportion of LICs trade a discounts to their net asset backing – some at substantial discounts.
There are 105 listed investment companies and listed investment trusts trading on the ASX. At last count, 60 of them were trading at a discount.
The investment opportunity is that their price will move back in line with their NTA. Some LICs that trade consistently below their NTA are taken over, with investors receiving cash at NTA or shares in better performing LICs.
Another unusual feature of the fund is that it has no fixed management fees, only a performance fee, which is 12.5 per cent of positive performance.
Affluence has kept the fund small, closing it to investment after the launch. It is opening it to new investment through December.
Affluence chief executive Daryl Wilson says: “One of the best advantages a fund manager can have is to be managing less money, not more. We can invest in opportunities that larger managers have no chance of executing.
“We seek the best LICs and combine them in a way that cushions against market corrections.”
At the end of October the fund held investments in 31 LICs. It participated in the Magellan Global Fund IPO but by early November it had sold its holding for a profit.
The fund is open to wholesale investors. Retail investors can gain access through the Affluence Investment Fund.