A listed investment company (LIC) can be an effective way to invest in shares. We can buy a whole portfolio of shares in a single purchase.
Unlike exchange-traded funds (ETFs), LICs can trade at a different price to their net asset value (NAV). Sometimes they’re cheaper and sometimes they are more expensive. That essentially means you can buy a LIC’s $1 basket of shares for $0.90, or it could also cost $1.10.
One of my favourite LIC ideas right now is MFF Capital Investments Ltd (ASX: MFF), but I recently included that as one of my dividend share ideas for September 2021.
But these two could also be solid options:
Future Generation Global Investment Co Ltd (ASX:FGG)
Future Generation Global is one of the more attractive LICs in my opinion.
It invests in the funds of multiple globally-focused fund managers. That means the overall portfolio is very diversified. Each of those fund manager portfolios could have at least 10-20 positions, or perhaps close to 100. Those investments can be chosen from around the world by the global fund managers. This LIC really ticks the diversification box.
But those fund managers work for free. No management fees and no performance fees. Instead, 1% of Future Generation’s net assets are donated to youth mental health charities each year. A great cause, particularly in the current world we live in.
Future Generation Global is invested in managers that have so many holdings as well as different investment strategies, so we shouldn’t expect incredible performance. But the returns have been solid, with less volatility. Over the last five years, the gross portfolio return has been an average of 14.3% per year – slightly less than the global share market return of 14.3% per year.
Its pre-tax net tangible assets (NTA) was $1.788 at the end of July 2021, compared to today’s share price of $1.65, a discount of around 8%.
L1 Long Short Fund Ltd (ASX: LSF)
This LIC is managed by L1 Capital. It invests in shares in Australia and New Zealand, North America, Europe and Asia. The LIC can also short shares, which it does – predominately in Australia and New Zealand.
At the end of July it had 18 short positions and 68 ‘long’ positions.
Performance has been very volatile, but over the longer-term it has performed pretty strongly. Over the last three three years its portfolio has produced an average return per year of 16.8%, outperforming the ASX 200 (ASX: XJO) by 7.4% per year.
Two of the performers in the portfolio during July, as examples of holdings, were Z Energy Ltd (ASX: ZEL) and Mineral Resources Limited (ASX: MIN).
L1 Long Short Fund’s share price of $2.61 is also at a discount to its pre-tax NTA at 31 August 2021 of $2.972. That’s a discount of 12%.
