One of the more successful Australian equity listed investment company managers, Wilson Asset Management, is branching out, with the launch of an international equity fund, WAM Global.
The offer will open on May 1 and will be open until June 8. Shares are expected to start trading on the ASX on June 22, with the company’s ASX code WGB.
WAM is seeking to raise $330 million, with an issue of 150 million shares at $2.20 a share. With oversubscriptions, the maximum on offer is 250 million shares, which would raise $550 million.
The company will invest in listed global securities, with a focus on undervalued growth companies. WAM is an active manager and has a bias to small and medium companies.
The investment manager may use derivatives and short-selling. It will not borrow or hedge currency positions.
When fully invested the portfolio is expected to be made up of 40 to 80 securities. The average weighting for any one security will be 1 to 5 per cent.
The investment manager will generally invest in developed markets, although the fund can invest in emerging markets.
WAM is the investment manager for six LICs, with a total of around $3 billion invested on behalf of more than 55,000 retail investors.
It takes a research-driven approach. Its investment team holds more than 2500 company meetings a year to gather intelligence.
The lead portfolio manager for the new fund is Catriona Burns. She began her career at Wilson Asset management in 2003. Since then she has worked for Hunter Hall in London and Airlie Funds Management before returning to WAM this year.
The global equity analyst is Nick Healy, who previously worked at Fidelity International in London.
The LIC structure means the fund has a closed-end pool of capital, which is not affected by fund flows. Shareholders buy and sell their shares on the ASX.
WAM’s intention is to pay fully franked dividends and it has established a dividend reinvestment plan.
The investment management fee is 1.25 per cent and there is a performance fee of 20 per cent of the portfolio’s outperformance of the MSCI World Index, subject to the recoupment of any prior underperformance. The investment manager has agreed to pay the offer costs that the company would normally be liable for.
WAM’s performance in Aussie equities stacks up well. WAM’s flagship fund, WAM Capital, which has $1.3 million of assets, has comfortably beaten its benchmark, the S&P/ASX All Ordinaries Accumulation Index over all periods since it was launched in 1999.
Over the 12 months to the end of March WAM Capital produced a return of 11.8 per cent, compared with a return of 3.6 per cent for the index.
WAM Leaders, which was launched in 2016, has beaten its benchmark over all periods since inception. WAM Microcap, which was launched in June last year, is beating its index. WAM Research, which was launched in 2003 but changed its strategy in 2010, is well ahead of its benchmark over all periods since then. WAM Active, which was launched in 2008, is ahead of benchmark over all periods.
WAM took over management of another LIC, Century Australia Investments, in April last year. It is also outperforming.
An important consideration when investing in LICs is how their share price trades, relative to their net asset backing. There are 93 LICs on the ASX and 60 of them have share prices that are at a discount to their net asset backing. In some cases that discount is more than 20 per cent.
WAM Capital is trading at a premium of around 20 per cent, whoch is the highest LIC premium on the ASX. WAM Active is trading a premium, while Century Australia is trading at a small discount (the ASX did not provide data on the other funds).