AUSTRALIA'S most influential listed investment fund is preparing for a $220 million sharemarket spending spree to take advantage of beaten-down stock prices.
Australian Foundation Investment Company, which has more than $4.3 billion under management and counts sharemarket doyen Bruce Teele as chairman, believes that with stocks trading at a deep discount after nearly two years of losses, it is almost time to start buying.
The Australian sharemarket has made a strong start to the year, gaining more than 5 per cent even as economic troubles in Europe continue to weigh on global sentiment.
AFIC managing director Ross Barker said retail investors were still holding back from equity markets because they were "shell-shocked" by the steep losses since last April.
"We're cautious about the short-term situation, but we're really a long-term investor," he said.
"Our approach is to take advantage of the negative market sentiment to pick up some things for the medium to long term which we think will be good for the portfolio in that time frame."
AFIC, Australia's largest listed fund manager, was last month rushed by investors for a $223 million convertible note raising. The notes trade on the Australian Securities Exchange and are similar to debt instruments in making an annual payout.
AFIC yesterday reported a 7 per cent drop in first-half profit to $113.6 million. While it generates most of its income from dividends in the shares it holds, most of the drop in earnings came from a fall in the market value of the fund's investment portfolio.
AFIC declared an interim dividend of 8? a share, fully franked, flat on the same time last year.
AFIC's mostly blue-chip portfolio fell 7.8 per cent in the half-year, compared with a 9.7 per cent fall in the S&P/ASX 200 Index.