Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 212

Australian LICs versus Berkshire Hathaway

[Editor’s Note: Peter Thornhill is a respected author and financial markets commentator, and a lecturer at the Centre for Continuing Education at Sydney University. He has been part of a lively conversation on dividends in our comments section, and sent in the following additional comment on the performance of three Australian LICs vs Berkshire Hathaway].

While at a minimum all three Listed Investment Company’s (LIC’s) performed on total returns at similar or better levels than Berkshire over the time frame, the chart below understates the LIC returns, which have also had a second layer of tax taken out. It is not a true like for like comparison, even when comparing amongst LICs who have realised gains and paid tax at different times and levels, so care should be taken when using this. Compound charts of this nature may also be impacted by the start date.

The LIC returns include the underlying investments held by the LICs having paid tax at 30% (which is the same as Berkshire paying its own company level tax) BUT also include the LICs paying investor level tax at 30% on realised capital gains. They would ultimately pass on the imputation credit for the tax paid to the investor. If you added this back to the LICs their returns would be higher again.

From the data on hand it is not possible however to distinguish between adding back the imputation credits on the realised capital gains from the imputation credits attached to the dividends on the underlying investments. However, the imputation credits in total are worth 1.5% - 2% per year and over 20 years would add a significant amount to the compounded end values of each LIC.

For an Australian investor who receives the benefit of the full level of franking credits, the compound end value of the returns of the LICs would be more than 50% higher than that shown below (i.e. the end value from MLT/WHF/ARG including the franking credits would exceed 900 in all cases).

LICs versus Berkshire shares; effects of imputation

LICs versus Berkshire shares; effects of imputation

 

 

  •   26 July 2017
  • 1
  •      
  •   
banner

Most viewed in recent weeks

It’s time for LICs to die

A high-profile dividend cut and a prominent fund manager’s apology have reignited a long-running debate. If investors can access similar exposures more cheaply and efficiently elsewhere, what exactly is keeping LICs alive?

The retirement scorecard: how many of these questions can you answer?

From the maths of retirement, estimating spending and picking the right asset allocation to survive a poor decade, here are the questions every retiree – current or future – should be able to answer for themselves.

Testamentary trusts: Treasury has picked the wrong reading

A decades-old estate planning tool has survived one tax crackdown only to be caught by another. The surprise isn't who the reform is targeting, but who could end up paying the price for drafting choices made years ago.

How the typical Australian Family could save $844,350 in taxes

The value of a testamentary trust is not determined by wealth alone. Depending on circumstances, it can reduce the tax burden on inherited income, create efficiencies and help build intergenerational wealth.

The housing slide could become a crash

House prices are sliding across Australia, yet the most dangerous ingredient for a housing crash is still missing. If job losses surge amid growing economic risks, today's correction could become a historic property downturn.

Will investors be better or worse off under new housing tax changes?

Housing tax reforms have sparked warnings of market turmoil and promises of greater fairness. But after modelling nearly two decades of property data, the results suggest winners and losers may not be who many investors expect.

Latest Updates

SMSF strategies

Division 296: the initial moves to make before the windows close

What if the best superannuation strategy isn't about earning more, but acting before your options disappear? Several overlooked planning windows are narrowing, with consequences that can last for decades.

Planning

Avoid unnecessary CGT with this estate planning clause

A simple estate plan can create a ticking time bomb. One overlooked clause can pit spouses against children, delay inheritances, and potentially leave a family facing an unexpected tax bill worth hundreds of thousands of dollars.

Exchange traded products

The hidden trade-off in fixed income ETFs

Some investment trade-offs are immediately visible. Others are embedded in the way a portfolio is constructed. Understanding the difference may explain why similar-looking investments can produce surprisingly different results.

Retirement

The mortgage free retirement is fading

What happens when a generation reaches retirement carrying obligations previous generations largely avoided? New research suggests we may need to rethink both how much we need in retirement and what life could look like.

Retirement

The key question to inspire a confident and purposeful retirement

Most people spend decades planning for retirement. Far fewer plan for what happens when they get there. The difference may explain why so many find the transition harder and less fulfilling than expected, despite careful preparation.

Latest from Morningstar

Making the case for a 'good enough' portfolio

Some investors spend years chasing the perfect strategy. Others choose a path that’s simply good enough and move on. Which approach is more likely to deliver both better outcomes and a happier financial life over the long run?

Investment strategies

Is the US market as expensive as CAPE says?

Many investing ideas survive for decades. But that does not make them right. A famous valuation measure implies that US shares are dangerously expensive, but the evidence may point to a very different conclusion.

Sponsors

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 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.