Change to buyback rules a boost for LICs

The much maligned listed investment company (LIC) market received a windfall today after the Australian Stock Exchange (ASX) allowed Macquarie Investment Management to offer a redemption facility with one of its listed schemes.

A redemption facility allows a LIC to offer buybacks to investors if the investment is trading at a discount, and could therefore reduce the risk of the LIC trading at a discount to net tangible assets.

The waiver will apply to Macquarie’s Morgan Winton Global Opportunities Trust, which will be listed on the ASX on December 8.

The trust is one of Macquarie’s three professional series funds. Liquidity constraints not present in the other two funds in the series have prompted its listing.

“We’ve listed this fund to give investors liquidity, but they don’t want to see it trading at a discount so we’ve introduced these buyback facilities,” Macquarie Financial Services Group division director Craig Swanger said.

Swanger said the problem of LICs trading at a discount was not ubiquitous.

“The best premiums remaining in this market are the unique ones and the ones not holding large amounts of cash. LICs such as Platinum Capital and Goldlink for example offer unique investments, and so typically have traded at premiums.”

“The Winton Trust is unique in Australia... However, not all unique LICs trade at premiums so we see this mechanism as a ‘backup plan’.”