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‘I would never have done it’: Monash ditches LIC

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Investment firm Monash has restructured its Absolute Investment Company LIC (which traded under the ASX ticker MA1) with near-unanimous shareholder approval, voicing concerns that the LIC was “besmirching” the house’s reputation as top fundies.

Monash Investors will restructure its Absolute Investment Company into an exchange-traded managed fund (ETMF) – the Monash Absolute Active Trust (ASX: MAAT) – in what it believes is an Australia-first move, prompted by years of the LIC trading at a discount to its assets despite its high performance.

“Within two years of its listing, we thought ‘this is reflecting badly on us’…we just felt it was besmirching us to be managing an LIC that was trading at a discount and we weren’t prepared to have this situation continue,” Monash co-founder Simon Shields told media. “Time will tell if people want it.”

Shields said the original decision to create an LIC was prompted by conversations with advisers hungry for “something listed” but that he would “never have done it” if Monash had clear sightlines on the tax complexities of the vehicle.

“There’s a lot of nuances to the LIC that are not obvious. For example, pre-tax NTA is pre-future tax. It’s pre-tax that hasn’t been paid yet, but it’s not pre-tax that’s already been paid,” Shields said. “Trying to explain that pre-tax NTA is different from the unit price, it’s very hard. We thought we understood that, but it’s only by experiencing it that it was brought home to us.”

MAAT listed on the ASX on Thursday (10 June) with near-unanimous shareholder support for the new structure, though Shields anticipated that up to 30 per cent of assets would ultimately be redeemed by shareholders like Sandon, Mirabella, and Phoenix, saying “That’s just the way the world works. Investors give you the money and they take it away.”

“We’ve given this up because we think it’s the right thing to do. We started this process before we were under pressure from anybody to do this, and we’re the first people to do it in this way.”

While Monash is the first to make the move, the firm expects others to follow it through the door now that it has worked out how to get the new structure approval from regulatory bodies and counterparties.

“ETMFs are a great solution to having a listed investment product…Any reputable fund manager with their LIC at a discount has got to be worried that that’s an unfair situation and reflects poorly on them as fund managers,” said Shields. 

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