Investments

Recent Buy: Wilson Asset Management – Global LIC (WGB.AX)

This past few weeks I’ve had a little more investing activity than usual – I bought a second listed investment company 🙂

Wilson Asset Management Global LIC

Wilson Asset Management Global (WGB.AX) LIC aims to deliver risk adjusted returns by investing in undervalued international growth companies, including by way of capital growth and a stream of fully franked dividends.

WAM Global recently completed an IPO to raise $550 mln.

Being a new LIC there is no track record. Wilson Asset Management have a long history however of solid investment returns. Their flagship fund, WAM Capital has returned 17.5% p.a. since inception, 19 years ago. WAM funds typically invest in small-mid cap industrials but also have funds investing in ASX200 and micro-cap stocks.

The new fund is headed up by Catriona Burns who recently returned to WAM after a stint at Hunter Hall in London. She has accumulated over 14 years experience investing in Australian and Global equities. Geoff Wilson and Chris Scott round out the portfolio management team.

WGB will primarily invest in long positions but has the mandate to short stocks it thinks will fall in value. Typically no more than 5 – 10% of the value of the portfolio is expected to be made up of short positions – though up to 50% of the portfolio may be short. WGB won’t use leverage.

Fees

WAM Global comes with the highest fee of any LIC I own. The annual management fee is 1.25% and the performance fee is 20% or NTA returns above the MSCI world index after prior underperformance has been recouped. For comparison, my idea of more reasonable fees are 0.75% p.a. without management fee or a management fee only when performance is excess a benchmark with a high watermark feature. I am more than happy to pay for superior investment management –  superior is hard to find.

Risks

Standard investment risks apply. Additionally, the NTA may decline in value, WGB may trade at a persistent discount to NTA or fail to outperform a passive global index fund.

Why invest at IPO?

Usually I wouldn’t invest in an LIC at IPO as the initial costs can sometimes be subtracted from opening NTA. This is a poor outcome for initial investors. WAM covered the costs externally to invested funds which meant this wasn’t a concern.

Wilson funds typically trade at a premium to NTA due to their robust historic track record. I think it is likely WGB will do the same in time. This meant I couldn’t follow my usual approach and buy well below NTA. But the opportunity to invest at IPO was one worth taking given the fair probability the LIC will perform well in the longer term. I haven’t invested in other Wilson LIC’s due to their currently high premiums to NTA.

WAM Global complements my current holdings of globally diversified LIC’s and Investment Trusts, Cadence Capital, Aberforth Smaller Companies Trust, Finsbury Growth and Income Trust and adds to my other two Aussie LIC’s Thorney Opportunities, Barrack Street Investments.

These investments have helped improve diversification of the WF30 Portfolio – some even provide a nice stream of fully-franked dividends.

Your comments and discussion are always welcome!

Join the discussion...