Fees warning around new LICs
The Future of Financial Advice (FOFA) changes have seen a growth in listed investment company (LIC) vehicles in Australia but investors need to be cautious in circumstances where fund managers have launched LICs carrying high base fees and performance fees, according to LIC specialist, Argo Investments.
Argo chair, Ian Martin said FOFA had seen the number of LICs listed on the Australian Securities Exchange (ASX) double to over 100 with the FOFA changes having levelled the playing field by abolishing conflicting commission structures in the financial planning sector.
“We note that most of the recently listed LICs are externally managed, often launched by fund managers who already offer unlisted managed funds to the public,” Martin said. “It is important to examine the structure of the fees charged by external managers to the LIC vehicles, as often they include both high base fees as well as performance fees which can limit the growth potential and performance of the LIC itself.”
The Argo chair said it was also important to be aware of differences that are emerging in the disclosure of investment performance figures among LICs.
“You need to be sure you are comparing ‘apples with apples’ when deciding on appropriate LIC investments. For example, some managers are quoting LIC performance statistics before deducting costs (including fees) and tax, and calculating their fees on the same basis,” Martin said.
He said financial advisers could help with this if disclosures were not clear.
Recommended for you
Funds managers are being urged by financial advisers to improve their “outdated” education and communication about alternative funds as they actively target them towards retail clients.
GAM Investments has appointed Eric Finnell as its managing director for Australia after his predecessor left to take up the CEO role at Global X.
Fidelity International has looked internally to appoint a head of strategic sales and solutions for its Australian division, which is a newly created role for the business.
Lonsec’s deputy CIO Deanne Baker has highlighted what investment tools the firm is harnessing to mitigate the impact of geopolitical risks in its managed account offerings.