Geoff Wilson
The three things that don’t fly with investors for listed investment companies are funds of funds, private equity and Asia, according to Australia’s LIC guru, Geoff Wilson. But what does fly, he is discovering, is a multi-manager product with very low fees and a charitable cause attached.
Wilson last week finished up a national roadshow for his latest LIC, the Future Generation Global Investment Company (FGG), which looks likely to comfortably raise $550 million for a global equities strategy to be managed by 20 firms.
The managers, and other service providers including the ASX and administrator White Consulting, will be donating most or all of their fees back to the fund so that 1 per cent of the assets can be donated annually to a range of mental health organisations. The $5 million-plus annual donations will amount – sadly – to the largest non-government allocation to the mental health cause in Australia.
Wilson Asset Management, one of the most successful privately owned fund managers in the country, has about $1.1 billion under management in LICs, the first of which was launched in 1999. The FGG follows the similar FGX (Future Generation Investment Company) Aussie equities LIC launched last year, which raised $200 million. That fund donates 1 per cent of assets per year to a range of charities focused on homeless and at-risk youth.
The two Future Generation LICs had their genesis in the UK, where Wilson observed during a visit that the hedge fund manager Tom Henderson launching an LIC called Battle Against Cancer Investment Trust, which was a big hedge fund that donated 1 per cent of its assets to cancer research.
“I met with him and he told me that shareholders also needed to get a good deal,” Wilson says. “With our business, we have 23,000 shareholders, so I thought we could do the same in Australia.”
His view on Australian LICs is that the only ones which work using a multi-manager approach are ones which do not double up on fees. For FGG, the see-through average management fee is 1.3 per cent and the 16 managers which have performance kickers charge an average of 16.1 per cent for that component.
“This is a very good deal for investors,” Wilson said. “The only thing that will stop us raising more money is the hours in the day we have to sit down and explain to it to people. Almost every one we see is getting on board in some fashion.”
Brokers, including Macquarie Bank and Morgans, for instance, are incentivising their advisors to donate their fees and some of the fund managers involved are providing separate donations.
Wilson said the recipient charities for the FGG will have three new funding pools: the annual donations based on 1 per cent of assets, a scheme to voluntarily donate the expected 4-5 per cent dividends, and separate donations from investors and their associates or trusts.
One interesting development with the FGX is that one of the recipient charities sought to invest in the fund as well, for its professional management skill, while getting back 1 per cent plus dividends.
The offer for FGG closes on August 28 and ASX listing is expected on September 10.
Download prospectus here