Australian LICs warned on aggressive hedge funds
The significant undervaluation of many Australian listed investment companies (LICs) and trusts will make them targets for hedge funds, according to a UK expert.
Pottinger senior adviser Nicholas Gold said he believed dozens of LICs and listed trusts had share prices more than 50 per cent below the net asset value of their investments, and were attractive targets for hedge funds prepared to force restructuring or even gain control and sell off their investments.
"International hedge funds including Laxey, Carrousel and Weiss, as well as domestic active investors such as Dixon Advisory and Nick Bolton, have attacked a range of Australian LICs and trusts in recent years," he said.
Gold said Australian LICs should be prepared for further aggressive action by "these predators" as their activity in Australia was still relatively low compared to Europe and North America.
Pottinger joint chief executive Nigel Lake said many boards were not well prepared to respond to an aggressor and all too often the range of response options became very narrow once a hedge fund had gained a significant stake.
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