Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Register

25 June 2026

Home / 172

Insights into LICs trading at a discount

Research company Independent Investment Research (IIR) produces a monthly report on Listed Investment Companies, which Cuffelinks regularly publishes.

In addition to the usual updates on new issues and fund activity, it includes an extensive database on LICs covered in their research.

This week, there is a useful article on LICs trading at a discount to their Net Tangible Assets (NTA) value. This does not necessarily make them a 'buy', as explained by IIR:

"LICs can often trade at a discount for a prolonged period and there is no guarantee that share prices will eventually move towards NTA. Before buying LICs at a discount we need to understand why they are trading at a discount and the likely catalysts to move them closer to NTA."

Here is a sample. Despite some of the LICs being managed by prominent fund managers, for various reasons, some LICs fall out of favour.

For example, the portfolio of a LIC such as Flagship Investments (ASX:FSI) has outperformed its index but it has a long history of trading at a discount, in this case over 20%, partly due to its relatively small size (about $40 million). As IIR writes on FSI:

"Large-cap stocks account for around half the portfolio, with the rest split between mid, small and micro-cap stocks. The portfolio (pre-tax NAV plus dividends) has outperformed the ASX All Ordinaries Accumulation Index over one, three and five-year periods. Performance has been helped by exposure to the better performing small cap sector of the market. Tracking error is slightly higher than some of the large cap focused LICs but beta is below one. FSI was at a 21.5% discount to pre-tax NTA at 31 July 2016. This looks an attractive entry point, but the shares have historically traded at a large discount. If the company is able to sustain outperformance this may lead to a rerating over time."

There is no slow down in the number of LICs coming to the market, with total funds under management reaching the $30 billion level. Given there is now a choice of over 80 LICs, it's a segment of the market worth understanding.

 

Graham Hand is Editor of Cuffelinks. Disclosure: Graham is on the board of the Listed Investment Company, Absolute Equity Performance Fund Limited (ASX:AEG), and holds an investment in FSI. This article is general information and does not consider the circumstances of any individual.  

 

  •   8 September 2016
  • 1
  •      
  •   

RELATED ARTICLES

The missing 30%: how LIC returns are understated, and why it matters

Why LICs may be close to bottoming

The fascinating battle between Nick Bolton and Magellan

Firstlinks is sponsored by:
banner

Most viewed in recent weeks

Noel Whittaker’s take on the budget

Marketed as a fix for inequality and housing affordability, the latest budget instead delivers a tangle of tax changes that leave everyday Australians worse off.

Australia has no death duties. Technically.

Australia may not levy formal death duties, but a growing web of tax measures is quietly shaping what wealth passes between generations. Now, the 2026 budget adds another layer.

How to minimise tax with a will

Inheritance tax implications in Australia may surprise some, as poor estate planning without proper wills or trusts can lead to costly tax bills and delays for beneficiaries.

Testamentary trusts post-budget: Estate planning, tax reform and the ‘death tax’ debate

Proposed Budget changes to taxation are casting new uncertainty over testamentary trusts, prompting closer scrutiny of estate planning structures and the real implications of reforms still taking shape.

Back to the future - Why indexing CGT is a good idea

A return to indexation of capital gains would be a fairer way to compensate households for the effects of inflation than the current discount. Importantly, it opens the door to future, broader reforms to stop the taxation of inflation.

The investment mistake killing your returns

Retail investors face an increasingly complex product environment, but simplicity may be the most overlooked advantage in building a portfolio you can actually live with.

Latest Updates

Investment strategies

Choose your hedges wisely… and often

A new market regime is exposing the fragility of static hedges. With correlations shifting and safe havens flipping, investors must rethink diversification and adopt more adaptive tools to protect capital.

Investment strategies

Yields take centre stage again

The Australian credit landscape is shifting. Yields are rising, issuance is strong and spreads continue to tighten. Income is re‑emerging as the dominant driver of returns, though pockets of risk may be building beneath the surface.

Investment strategies

The grass is always greener: Rethinking Australian vs global equities

Australia's once‑dominant sharemarket is losing ground as others surge ahead, prompting investors to question home‑bias instincts. Meanwhile, the US market appears attractive. Is it time to revisit your global equity allocation?

Investment strategies

Stop asking if there's a stock market bubble. Ask this instead.

Markets continue to push onwards despite valuations looking stretched by historical standards. Bubble talk is rampant, however investors may be focusing on the wrong thing. The real story sits deeper than the headlines.

Taxation

The GST cannot stop inflation

Raising the GST when inflation jumps sounds clever on paper, until we examine how it may play out in practice. What is pitched as a simple inflation fix can lead to a sharp turn in the wrong direction for prices.

Shares

Why SpaceX is coming to your super fund

SpaceX’s blockbuster debut is grabbing headlines, but the real story for Australian investors is much quieter. Giant listings eventually filter into super funds and ETFs, subtly reshaping portfolios long before most realise.

Taxation

Is the government being honest with us about its business CGT changes?

The government’s assurances on small‑business concessions don’t withstand the scrutiny. Token carve‑outs and a lack of credible rationale for CGT changes may reshape how Australia rewards long‑term value creation. 

Sponsors

Alliances

Site Map

About Firstlinks

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.