Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Register

9 July 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

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.

Meg on SMSFs: The CGT changes don’t impact super but what about Div 296 tax decisions?

New CGT rules could tip the scales in the super vs non-super debate. For those facing the Division 296 tax, the case for withdrawing has gotten more complex. A "comparison rate" tool may help assess decisions.

High quality businesses are on sale

Beneath the dominance of the ASX's largest stocks, much of the market has been left behind. High-quality companies are now trading at levels rarely seen, offering opportunities for investors willing to look deeper.

The strange effect of the 30% minimum capital gains tax

The 30% minimum tax on capital gains sits at the heart of the budget's proposed reforms. Yet the mechanics reveal anomalies that introduce unexpected distortions that raise questions about its design.

Welcome to Firstlinks Edition 667 with weekend update

The downfall of the giant and three lessons for investors.

  • 18 June 2026

Latest Updates

Latest from Morningstar

Ranking three common retirement strategies

The defining challenge of retirement isn't just about building wealth, it's about converting your lifetime savings into sustainable income. A holistic understanding of different strategies can improve long-term outcomes.

Economy

Was life really better in the good old days?

Are we worse off than previous generations? Lately, there seems to be a heightened level of angst that economic conditions are getting harder and that the two-party political system (and maybe democracy too) is failing voters.

Retirement

Australia has saved $4.5 trillion for retirement. Here's what matters more

Most Australians approaching retirement can tell you the exact dollar value of their super account. But success depends on more than a sizeable balance. Here's four key questions to ask yourself at the start of the financial year. 

Who gains in an AI-supercharged economy?

AI is already reshaping the economy, but companies building transformative technologies rarely capture the greatest long-term value. Instead, those benefits accrue to the users. We may well see this pattern reproduced. 

Taxation

Div 296's million-dollar reset worth $25,000

The 'cost base reset' for the new super tax is being sold as protection for pre-July gains. A worked example shows $1M of protection is worth about $25,000, and the real deadline has not passed.

Latest from Morningstar

The forecasting fix that Wall Street missed

Asking whether markets are overpriced may be the wrong question. New research suggests that traditional valuation metrics used to forecast returns may have been misread. Here are five takeaways for investors.

Investment strategies

Should a fund manager invest their own money differently?

Investors often like the idea that fund managers should invest client money exactly as they invest their own. But reality is more complicated. Unique circumstances make a different approach rational and, at times, beneficial.

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.