There weren’t any LICs launched on the ASX last year but the drought is about to break
May 14, 2021 | Nick Sundich
It’s been a long time between drinks for ASX LICs (Listed Investment Companies) but the drought is set to end.
Last year saw no new LICs enter the ASX even with the hot IPO market in the back half of the year. In fact LICs only raised about $27 million when ASX equities raised over $50 billion.
Speaking with Stockhead Ryan Legudi, managing director at Salter Brothers, blamed regulatory changes surrounding raising capital for LICs.
But his firm is set to break the drought in the coming weeks.
Salter Brothers has launched a campaign for a LIC of its own having lodged a prospectus a fortnight ago. The prospectus anticipates a listing on June 8.
Additionally, Wilson Asset Management – which already runs a handful of LICs – will launch another one WAM Strategic in the coming weeks.
While Legudi claims to be the “first ones out of the gate under the new fee regime”, he’s expecting the sector to fire up again.
“I expect now that there are reference points in the market that we will start to see some more LICs come to market,” he said.
How will this fund differ from other ASX LICs?
Salter Brothers is seeking to raise up to $20 million for its LIC and will have 20-35 emerging companies in Australia and abroad.
“There is as far as we can tell only one other [ASX] LIC that can do private unlisted investments. So our focus is on the emerging company segment, we can invest into companies under $500m market cap,” Legudi said.
“These companies can grow north but when we first put our money in, that first capital need to be sub $500 million market cap.
“We’re very domestic focused – although we do have a mandate to invest offshore, predominantly our expertise lies in Australia.”
However the LIC will be sector agnostic – for the most part.
“The approach is fundamentals based. So we see a pretty clear gap in the market particularly at the lower end of the $500m market cap end in that sort of nano/microcap space where there is none or very limited research available,” Legudi said.
“Often at times they can be quite illiquid – some of these companies – so there’s not a lot of appetite to participate until these companies start to get to a higher level of growth.
“So we see a real opportunity to find undervalued companies in this particularly segment by undertaking that bottoms-up work.”
Nonetheless Legudi admitted the fund tried to stay in its core competencies and this excluded biotech and resources, leaning instead towards tech and telcos.
He reports interest has been good, crediting some of Salter’s exit events in recent months with publicity for this would-be ASX LIC.
“The interest has been good, obviously we’re working with Ord Minnett and we have a high degree of confidence we’ll be able to raise the amount we need to hit the IPO,” Legudi said.
View online at stockhead.com.au