Lion Selection Group is a Listed Investment Company (LIC), trading on the Australian Securities Exchange (ASX:LSX).
LIC’s, like managed funds, pool investors’ capital for collective investment into a portfolio of companies. Importantly, LIC’s differ from managed funds in a way that allows for long-term investment, which is essential for investing in junior mining companies.
Shareholders in Lion benefit from the advantages of listed investment company structure:
|Benefits of collective ownership||Larger holdings may be strategic or influential.|
|Diversity||An investment in a listed investment company is an investment in a portfolio of stocks, which reduces stock specific risk.|
|Experienced and focused management||Listed investment companies have a board of directors and management team dedicated to managing the investments of the company.
In the case of Lion Selection Group, the Board of Directors and Lion Manager have substantial collective mining industry, company administration, finance and mining investment experience, which has proven successful in selecting investments and generating value for shareholders.
|Fixed capital base||Listed investment companies are closed ended, which means they do not issue or redeem units to facilitate fund inflows and outflows. In times of uncertainty, many investors redeem units from managed funds, which has the adverse effect of the fund needing to sell investments to meet redemptions.
Investors in listed investment companies can sell their shares on the stock market, which does not affect investment decisions of the company. This aspect of listed investment companies makes the structure the most appropriate match of funding for Lion?’s investments, which require a long–term investment view.
|Dividends||If listed investment companies are profitable, they may pay dividends which could be franked up to 100%. Funds structured as trusts are required to distribute all surplus income in the year it occurs.
Aside from potential tax advantages of franking derived from listed investment companies (which are dependent on individual circumstances), it is possible for listed investment company boards to create a stable yield from fluctuating underlying earnings by selectively retaining earnings.
|Growth||Listed investment companies are also more flexible in growing capital by reinvesting earnings rather than distributing them.|
|Simplicity||Immediate transparency to value and access to liquidity (subject to demand) via ASX listing.|