ASX Listed Managed Investments Monthly Report

Capital Continues to Flow Into LMIs

Through April and May we have seen three more listed managed
investment vehicles (LMIs) start trading on the ASX including two
fixed income focused listed investment trusts (LITs), Perpetual Credit
Income Trust (ASX:PCI) and MCP Wholesale Income Opportunities
Trust (ASX:MOT). Refer to our LMI Monthly Update of 18 March 2019
for more details on these LITs.
Pengana Private Equity Trust (ASX:PE1) units listed in April after
it raised $205m, at the lower end of its $100m to $600m target
range. PE1 is a unique offering in that it is the only LMI that will
provide exposure to a well-diversified portfolio of global private
equity investments. Although the PE1 raising was towards the lower
end of expectations we remain comfortable that it will still be able
to achieve its objective of building a well-diversified portfolio and
maintain our Recommended Plus rating.
The listing of PCI and MOT continues the recent trend of fixed
income managers tapping the LMI sector for funds. Given the
domestic and global low interest rate environment and the potential
for further interest rate cuts, it is not hard to see why these offerings
are attracting strong demand. These fixed income trusts are offering
investors higher yields than available on bank deposits, which
are the traditional avenue for retail investors looking for a reliable
income stream. However, with rates now so low and even negative
factoring in inflation, yield hungry investors have gone in search
of yield in alternative fixed income products which were once on
the periphery of the retail market and only generally accessed by
institutional investors. These products are now being increasingly
accessed by retail investors through LMI products and unlisted unit
trust structures. However, investors need to be aware that while the
underlying assets can produce a higher yield and pay regular, stable
income, the risks are higher than traditional bank deposits. Investors
should always ensure that they understand the risks associated with
any new fixed income offerings and are comfortable including these
in their portfolios. These products don’t come with any guarantees,
unlike bank deposits, and a significant deterioration in global credit
conditions could have an impact on returns.
The addition of PCI and MOT takes the total number of fixed
income LMIs to six and we are aware of two more offerings in
the pipeline, including one from Partners Group, a global private
markets investment manager which is planning to launch a listed
investment trust later this year. The Partners Group LMI will invest in
a portfolio of global debt instruments in a segment of the market that
is not generally accessible to retail investors. We will provide more
information on the proposed LMIs as it comes to hand.
In addition to funds flowing into new LMIs, there have also been
a number of secondary market raisings in recent months. In May/
June VGI Partners Global Investments (ASX:VG1) successfully raised
$300m via a placement and entitlements offer. VG1 shareholders also
stumped up $75m for shares in the Manager as part of an IPO offer
for VGI Partners (ASX:VGI).
There have also been a number of secondary market raisings by
fixed income LMIs with NBI Global Corporate Income Trust (ASX:NBI)
raising $476m via entitlement and shortfall offers. This was the
maximum under the offer and funds will be invested in accordance
with NBI’s strategy to invest in global, high yield, liquid corporate
bonds. In June, Qualitas Real Estate Income Fund (ASX:QRI) raised
$34.7m via a placement to wholesale investors and in July Gryphon
Capital Income Trust (ASX:GCI) announced entitlement and shortfall
offers to raise up to $108m.
These offers show that the fixed income LMIs are having no trouble
finding new assets for their investment portfolios and there is no
shortage of investors willing to provide the funds. This sector had a
market cap of $3bn at the end of May and with the new offerings yet
to come to market and secondary market raisings we expect this to
be well over $4bn by the end of 2019.
Spotlight on DUI and Rating Upgrade
Diversified United Investment (ASX:DUI) is one of the older style
internally managed LICs. Listed on the ASX in 1991, the company
invests in a portfolio of ASX-listed securities to generate income
and capital appreciation over the long-term. Whilst the portfolio is
predominantly invested in Australian large caps, up to 5% can be held
in small-caps via an allocation to small cap fund managers and up to
20% (currently 15%) can be held in international shares via ETFs and
international fund managers.
The portfolio has performed well with DUI at the top of our
performance table (see above) for LICs with an Australian shares
focus. It has outperformed the S&P/ASX 200 Accumulation Index
over 1, 3, 5 & 10-year periods. The outperformance can perhaps
partly be attributable to the small international holding, but individual
Australian stocks, such as an overweight position in CSL, have played
a large part. The portfolio is managed by the Board which meets
on a monthly basis to review the portfolio. All four directors have
significant market experience. Like the other internally managed
LICs, DUI is low cost with a management expense ratio of just
0.12% p.a. The fully franked dividend yield of around 3.5% is a little
lower than some other Australian share focused LICs.
Given the strong and consistent portfolio performance we are
upgrading our rating for DUI from Recommended to Recommended
Plus. At the time of writing the shares are trading at a 6.5% discount
to pre-tax NTA. We believe this is a good entry point for long-term
investors seeking exposure to a well-managed portfolio of Australian
shares with some modest international exposure.
Bailador has a Good Year
Technology focused LIC, Bailador Technology Investments (ASX:BTI)
had a good FY2019 with pre-tax NTA per share at 30 June 2019 up
18.2% for the 12 months. The increase in NTA was driven by sizable
upwards revaluations in a number of its key portfolio companies
including SiteMinder (+30.4%), DocsCorp (+19.3%) and Straker
Translations (+25.7%). We shone the spotlight on BTI 12 months
ago in our June 2018 Monthly LMI Update when the shares were
trading at $0.74. This was after write-downs in a couple of its portfolio
companies, including iPRO which was completely written off in 2017.
At the time we wrote “Overall, the portfolio now appears to be in
relatively good shape and with the underlying portfolio of businesses
growing revenue at an annual rate of 35% there appears to be good
valuation upside. At current prices we think BTI probably offers good
value given the large discount to pre-tax NTA and the potential for
valuation uplifts over coming months.” We did remind investors that
“private equity style investing is more suited to higher risk, patient
investors and that it should form only a relatively small portion of
a well-diversified portfolio.” We note that returns from this style of
investment can be lumpy and take time to emerge. Investors who
acquired BTI at the time have done well with the shares now trading
at $1.07. Despite the strong share price performance the shares are
still at a discount to the June 2019 pre-tax NTA of $1.31 per share and
also the post-tax NTA of $1.21 per share. We will take a closer look at
BTI and its prospects in our next Monthly LMI Update. Our rating for
BTI is Recommended Plus.

Amcil is an investment company that invests in tradeable securities. Co. invests in equity securities and other instruments to provide shareholders with investment returns through access to a stream of dividends and enhancement of capital invested.

AmTrust Financial Services

AmTrust Financial Services is a holding company. Through its subsidiaries, the company underwrites and provides property and casualty insurance products, including workers' compensation, commercial automobile, general liability and extended service and warranty coverage. The company segments are: Small Commercial Business, which provides workers' compensation insurance; Specialty Risk and Extended Warranty, which provides custom designed coverages, such as accidental damage plans and protection plans; and Specialty Program, which provides workers' compensation, commercial auto liability, property coverage, excess and surplus lines programs and other commercial property and casualty insurance.

Argo Investments

Argo Investments is an investment company engaged in the investment of funds in Australian listed securities and short-term interest bearing securities. Co.'s wholly owned subsidiary, Argo Service Company Pty Ltd, also provides management services to an external listed investment company under an Australian Financial Services License. Co. invests in a diversified portfolio of securities. The portfolio contains investments in companies and trusts representing a cross section of Australia's enterprises, including a number with substantial overseas operations.

Australian Foundation Investment

Australian Foundation Investment is an investment company. Co. provides shareholders with investment returns through access to a stream of franked dividends and enhancement of capital invested. Co.'s primary investment goals are to pay dividends which, over time, grow faster than the rate of inflation; and to provide total returns over the medium to long term. As of June 30 2016, Co.'s total investment portfolio amounted to A$6.24 billion.

Australian United Investment

Australian United Investment is an investment company which seeks, through a portfolio of securities predominantly comprising shares of companies listed on the Australian Stock Exchange, to provide income and capital appreciation over the longer term.

Bailador Technology Investments

Bailador Technology Investments is engaged in investment in internet-related businesses in Australia and New Zealand. Co. focuses on software, internet, mobile, data, online market-places and telecommunications-related businesses with proven revenue generation and management capability, demonstrated business models and expansion opportunities.

BKI Investment

BKI Investment is an investment company. Co. invests in a diversified portfolio of Australian shares, trusts and interest bearing securities. Co.'s investment objective is to generate an increasing income stream for distribution to its shareholders in the form of fully franked dividends, to the extent of its available imputation tax credits, through long-term investment in a portfolio of assets that are also able to deliver long term capital growth to shareholders. As of June 30 2010, Co. had total assets of A$559,076,000 and investment portfolio totaled A$503,679,000.


Bollore is a holding company. Through its subsidiaries, Co. conducts business in international logistics, transportation and logistics in Africa (port management, stevedoring, logistics), fuel distribution, batteries and supercapacitors, electric vehicles, plastic films for capacitors and packaging, dedicated terminals and systems, plantations, communicationa and the media (television and free press, advertising and market research) and the management of portfolio shareholdings. Co.'s activities can be divided into four segments: Transportation and logistics, Industry, Fuel distribution, and Other activities.

Cordish Dixon Equity Fund III

Cordish Dixon Private Equity Fund 2 (ASX: CD2)

Diversified United Investment

Diversified United Investments operates as an investment company in Australia. Co.'s principal activity is to take a medium to long term view and to invest in Australian equities, listed property trusts, and short term investments, and international equities through exchange traded index funds. Investments may also be made from time to time in fixed interest securities or convertible notes.

Evans & Partners Australian Flagship Fund

Evans & Partners Australian Flagship Fund. Evans & Partners Australian Flagship Fund is unit trust (the Trust). The Trust's objective is to provide investors with capital growth, risk-adjusted returns and stable distributions. It invests in medium to long-term Australian Equities. The Trust's investment manager is Evans and Partners Investment Management Pty Limited.

Evans & Partners Global Disruption Fund

Evans & Partners Global Disruption Fund. Evans & Partners Global Disruption Fund (the Fund) is an Australia-based unit trust fund. The Company is focused on targeting portfolio of investments, primarily listed companies. It may invest primarily in international and Australian securities that are quoted for trading on a financial market, as well as some unquoted securities. It may also hold cash or cash equivalents and use Derivatives and other financial instruments. Their investment parameter for the portfolio includes 30% to 98% in listed international equities; up to 20% in listed Australian equities; 2% to 50% in cash; at the time of acquisition, a maximum weighting of 15% for any one security; and not more than 20% of the portfolio to comprise unlisted securities, measured at the time of the latest acquisition of unlisted securities. The Company's investment manager is Evans and Partners Investment Management Pty Limited.

Flagship Investments

Flagship Investments is an investment company engaged in providing investors with access to a range of Australian investment portfolio. Co.'s investment objectives are to achieve medium to long-term capital growth and income through investing in a portfolio of Australian companies; to preserve and enhance the net asset value per share after allowing for inflation; and to provide Co.'s shareholders with dividend, which over time will grow at a rate in excess of the rate of inflation. As of June 30 2013, Co.'s investments portfolio was valued at A$34,102,000.

Gryphon Capital Income Trust

Gryphon Capital Income Trust. Gryphon Capital Income Trust is an Australian-based close-ended fund. The Company is exposed to the Australian securitized fixed income market, a large market which is dominated by institutional investors. The Company's investment objective of the Trust is to generate attractive risk adjusted returns principally through monthly income distributions with a low risk of capital loss.

L1 Long Short Fund

L1 Long Short Fund Ltd. L1 Long Short Fund Limited is an Australia-based investment company that manages return funds. The Company invests on diversified portfolios in Australian and New Zealand securities that include both short and long positions. L1 Capital Pty Limited is the Company's investment manager. Its investment strategy is to identify mispriced securities that can provide risk-adjusted returns. The Company's investment objective is to deliver risk-adjusted returns over long term and preserve capital.

Magellan Global Trust (ASX: MGG)


McPherson's is a supplier of health and beauty, consumer durables and household consumable products in Australasia, with operations in Australia, New Zealand and Asia. The health and beauty division markets and distributes beauty care, hair care, skincare and fragrance product ranges; the home appliance division markets and distributes appliances such as ovens, cooktops, washing machines and dishwashers; and the household consumables division markets and distributes kitchen essentials such as plastic bags, baking paper, cling wrap and aluminium foil. Co. owns a portfolio of brands such as Manicare, Lady Jayne, Dr. LeWinn's, A'kin, Swisspers, Moosehead, Maseur, Euromaid, Baumatic and Multix.


Milton operates in Australia and engages in investment. Co. invests in companies and trusts, real property development, fixed interest securities, and liquid assets such as cash and term deposits. As of June 30 2016, Co. had total assets of A$2.7 billion and total equity investment portfolio of A$2.6 billion.

Mirrabooka Investments

Mirrabooka Investments is a closed-ended investment company engaged in the investment in small and medium sized companies located within Australia and New Zealand. As of June 30 2012, Co. had total assets of A$300.1 million.

NB Global Corporate Income Trust

NB Global Corporate Income Trust (The Trust) is a managed investment scheme structured as a unit trust. The Trust's investment objective is to provide its unit holders with a consistent and stable income stream paid via monthly distributions, while achieving an attractive level of total return (income plus capital appreciation) over a full market cycle. The investment strategy of the Trust is to invest in and manage a portfolio of high yield bonds issued by companies located globally across both developed and emerging markets, with an emphasis on capital preservation by focusing on higher quality within the global high yield market, large and more liquid companies and by avoiding companies with deteriorating financials. Neuberger Berman Australia Pty Limited is the manager of the Trust.

Pengana International Equities Limited (ASX: PIA)

Pengana Private Equity Trust

Perpetual Equity Investment

Perpetual Equity Investment is a listed investment company that invests predominantly in Australian listed securities with typically a mid-cap bias and cash, deposit products and senior debt. Co. is engaged in providing investors with a income stream and long term capital in excess of its benchmark.

Platinum Asia Investments

Platinum Capital

Platinum Capital is an investment company. Co. is engaged in the investment of funds internationally into securities of companies, which are perceived by the Investment Manager, Platinum Investment Management Limited, to be undervalued.

Sandon Capital Investments

Sandon Capital Investments is engaged in the provision of investment management and corporate advisory services to shareholders in Australia. Co.'s investment objective is to provide shareholders with capital growth over the medium to long term, balanced with the distribution of income received by Co. through the payment of fully franked dividends to its shareholders. As of June 30, 2014, Co. had total assets of A$36,161,983 and total financial assets of A$19,781,218.

Templeton Global Growth Fund

Templeton Global Growth Fund invests in a portfolio of primarily international equities. Co. outsources its invesment management functions to Franklin Templeton Investments Australia Ltd, a member of the Franklin Resources Inc.

The Ophir High Conviction Fund (ASX: OPH)

VGI Partners Global Investments Limited (ASX: VG1)

WAM Active

Wam Active is engaged in making investments in listed companies.

WAM Capital

WAM Capital Limited is an investment company. Co. is engaged in making investments in listed and unlisted companies. Co. invests in equity and similar securites on the stock market primarily in Australia. Co. has two investment objectives: (i) to achieve a high real rate of return, comprising both income and capital growth, within risk parameters acceptable to the Directors, and (ii) to preserve the capital of Co. The manager has two investment approaches: Research Driven investing and Market Driven investing. As of June 30 2013, Co. had total assets of A$501,009,447 and the market value of its investments portfolio was A83,614,355.

Wam Global Ltd

Wam Leaders

WAM Leaders is a listed investment company. Co.'s investment objectives are to deliver investors a stream of fully franked dividends, provide capital growth, and preserve capital of the Co. Co.'s investment process is to focus on the S&P/ASX 200 Index. Co. provides investors with access to its two distinctive processes: the Research-driven investing process which involves diligent and deep research that focuses on free cash flow, return on equity and the quality of a company; and the Market-driven investing process which takes advantage of short-term mispricing opportunities in the Australian equity market.

WAM Microcap

WAM Microcap Limited is an Australia-based company. The Company seeks to invest primarily in small and micro-cap companies.

WAM Research

WAM Research is engaged in the investment of listed companies in Australia. Co.'s investment objectives are to achieve a high real rate of return, comprising both income and capital growth, within the risk parameters acceptable to the directors.

Independent Investment Research
Independent Investment Research

Independent Investment Research, "IIR", is an independent investment research house based in Australia and the United States. IIR specialises in the analysis of high quality commissioned research for Brokers, Family Offices and Fund Managers. IIR distributes its research in Asia, United States and the Americas. IIR does not participate in any corporate or capital raising activity and therefore it does not have any inherent bias that may result from research that is linked to any corporate/ capital raising activity.

IIR was established in 2004 under Aegis Equities Research Group of companies to provide investment research to a select group of retail and wholesale clients. Since March 2010, IIR (the Aegis Equities business was sold to Morningstar) has operated independently from Aegis by former Aegis senior executives/shareholders to provide clients with unparalleled research that covers listed and unlisted managed investments, listed companies, structured products, and IPO's.

IIR takes great pride in the quality and independence of our analysis, underpinned by high caliber staff and a transparent, proven and rigorous research methodology.

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