LICs and LITs grow in newer asset classes

The Australian listed investment industry, comprising listed investment companies (LICs) and listed investment trusts (LITs), has continued to experience growth in newer asset classes including property, credit and global equities, as the sector begins its 99^th year.

 This follows years of strong growth reported by the Listed Investment Companies and Trusts Association (LICAT) in the number and value of LICs and LITs providing investors with access to global equities, Asian markets, infrastructure and alternative assets including private equity, private debt and fixed income.

“Since the end of 2017, the total LIC and LIT sector has grown from $39.6 billion to $55.8 billion to be up 40.9% at the conclusion of October 2021,” Ian Irvine, Chief Executive Officer of LICAT, said.

“Over the same period the proportion of LICs and LITs holding global equities has almost doubled from $8.5 billion in total to $16.1 billion, to account for 29% of the sector.”

The sector also recorded strong growth in fixed income LITs, from $650 million to a current value of $5.5 billion at the end of October, accounting for 10% of the sector.

However, there has been a downward shift in the overall proportion of Australian equities in the sector despite an uplift in their value over the past four years to $34 billion, going from 77% to 61%.

Irvine said this changing dynamic within the sector provides investors and advisers with access to the closed-end structure of LICs and LITs over a broader range of asset classes, which can help with diversification strategies, asset allocation and to capitalise on the benefits.

“The closed-end LIC or LIT structure can be suited to the holding of longer duration assets or longer term investment strategies, while still providing underlying investors with the ability to increase or decrease their investment at any time, by buying or selling shares/units on ASX.”

Over 700,000 Australians now invest in the LIC and LIT sector according to LICAT.