I'm unlucky enough to be shareholder in Contango Microcap, a small LIC targeting small cap companies. When I pushed a lot of my money into indexes I thought I'd put a small amount into an active investment manager just for larfs, and I thought one area where it might be interesting would be the small cap space.
Anyhoo, someone way back asked what the difference was between ETFs and LICs?
LICs are generally an active managed fund overseen by a fund manager. Which may be internal or outsourced. One key issue is that the active management of LIC's can make them subject to governance risk. Fist fights and powerplays between the investment managers, unhappy shareholders, fighting for control over funds under management.
By comparison, you'd think the remit of an index is pretty straightforward (i.e. Replicate the index. ) and the relatively low fees they charge wouldn't make active management sustainable.
So this is what's happening at CTN at the moment.
http://www.smh.com.au/business/banking-and-finance/extraordinary-battle-under-way-at-contango-microcap-20170302-gup7ot.html
The price is depressed at the moment due to underperformance, but no doubt also due to the current uncertainty. It may resolve itself eventually but I'm wishing I'd just shoved the whole thing into a index.
Hunter Hall is another weird one.
http://www.afr.com/business/banking-and-finance/financial-services/hunter-hall-lic-saga-a-lesson-for-listed-invested-companies-everywhere-20170308-gutnrj
...I found this topic above of interest since I spend quite a bit of time looking into some of the LICs. I would also stress that with these two (CTN & HHV), one should do plenty of research into their corporate governance. Both have undergone change in recent times and are not shy in asking for shareholders to stump up new cash for new options, rights, placement issues etc
Hey ianvestor
I don't follow this thread as much as I used to but then popped in today and saw that you've quoted a previous post of mine.
I've quoted your note about doing research into corporate governance. I think it's good advice. However, no amount of research can uncover the future intentions of management, or significant shareholders, that may or may not be in control at the time you are considering making an investment - as well as the decisions they may make about the investment of funds.
So I would advise caution and knowing the limits of the ability of your own research.
I think the investors in Hunter Hall got blind sided. They would have got into it as an ethical fund. With an environmental screen Whatshisface gets cold feet and sells it to Soul Patts for a bargain, Soul Patts who are a key shareholder in New Hope Coal. Surely he could have found a buyer that had interests more in line with the mission of the fund he originally set up??? Very weird.
I got into CTN before any of the recent governance issues came to a head. It's died down a little. However, their price continues to underperform in the short term. While I think it's partly due to governance disputes, their price isn't too far away from the value of their Net Tangible Assets, so I think it's mainly down to bad stock picking. For example, the manager taking overweight positions (relative to the market) in frothy dumb punts - i.e. Slater and Gordon used to amount to about 3% of the fund. I doubt they would have had time to sell out so about 3% of the value of the fund would have disappeared in a few days.
Of course, if all goes well you go with an LIC that is able to outperform the market, year in and year out........
From my own experience with CTN, once reinvestment is taken into account, I've broken even - for now. However, I would have been better off had I put it into VAS or VGS. Then again, I've only held CTN since 2014 and 3 years is too short a time to really measure the performance of investments - but seeing a Board and the Board's management get rolled by hostile directors and shareholders does not inspire confidence!!!