Investment companies take plunge back to market
A WINDOW of opportunity appears to have opened for investment companies to list on the sharemarket, with a second fund being launched in a matter of weeks, as the market discount of listed investment companies continues to narrow.
Over the past year, listed investment companies have returned 22 per cent on average. This has prompted Naos Asset Management, which oversees about $20 million in two unlisted funds, to test the waters.
It is seeking to raise up to $50 million for its Naos Emerging Opportunities Co, which will invest in emerging companies that lie outside the ASX 100 index but are not microcaps.
The Naos managing director, Sebastian Evans, said, "We can be 100 per cent cash, or hold up to 15 to 20 positions. It will be a high-conviction fund."
The fund will focus on poorly understood or overlooked stocks.
The chairman is the former Macquarie banker David Rickards, and another former Macquarie banker, Warwick Evans, is a director. The management and directors are putting $2 million of their own money into the fund.
"The rush for yield is on its way to reaching a climax," Mr Evans said.
Naos tends to avoid investment in the resources industry, and has recently been looking at sectors such as cloud computing, life sciences and digital media.
Contango Asset Management recently sought to raise as much as $200 million for a listed fund, although its more realistic target is likely to be less than $80 million.
The strong performance of listed investment companies over the past year has resulted in some trading at a premium. For example, Djerriwarrh and Mirrabooka trade at a premium of 21 per cent and 13 per cent respectively.
The three listed funds in the Geoff Wilson stable - Wilson Asset Management, Wilson Active and Wilson Research - trade close to net asset backing, as do Cadence Capital, Australian Leaders and Sir Ron Brierley's new vehicle, Mercantile Investment.
"Listed investment companies paying fully franked dividends have been rewarded," a fund manager said.