Understanding Listed Investment Companies

Listed Investment Companies, commonly referred to as LIC’s, are a way for the average investor to gain exposure to professional investment managers. Having said this, not all professional investment managers do a good job of outperforming the market. Due to the structure of these investment vehicles there are also some drawbacks that can arise. Because LIC’s generally invest in listed stocks, it is usually possible to obtain a reasonably accurate measure of the net tangible assets (NTA) of the fund. Theoretically then, the share price of the LIC should trade very close to the NTA of the fund. In practice, however, this often isn’t the case.