By Ian Irvine, CEO, The Listed Investment Companies and Trust Association
This article is part of a special Australian Shareholders’ Association Insight Series exploring Listed Investment Vehicles (LIVs) – listed investment companies and trusts – that can provide diversification, professional management and income for individual investors.
Across five articles, the series will unpack what LIVs are, how they work, the potential benefits and risks and how they may complement a portfolio focused on longterm, shareholder aligned outcomes.
Many ASA members invest with long horizons, whether to fund retirement, support family, or leave a legacy. LIVs are expressly designed to support long‑term investment strategies by providing managers with a stable pool of capital that is not subject to daily inflows and outflows. This structure allows LIVs to invest in longer‑duration assets and stay the course during periods of volatility, rather than having to trade to meet redemptions.
That stability can be particularly valuable during market downturns. When other vehicles are forced sellers to meet withdrawals, LIVs may instead be in a position to deploy capital into undervalued opportunities, potentially enhancing long‑term returns. For investors, this can translate into a smoother implementation of the manager’s investment philosophy, without the dilution that can occur when short‑term flows drive portfolio decisions.
Income is another important dimension of investment longevity. LICs often seek to deliver a relatively steady stream of fully franked dividends, reflecting the underlying earnings of their portfolios and their company tax status. LITs, as trusts, typically distribute their income and gains directly to unitholders without paying tax at the trust level. Either way, many LIVs place strong emphasis on income consistency, which can appeal to investors who rely on distributions to meet living expenses.
For those carefully managing their risk in retirement, the combination of long‑term capital focus and income priorities may make LIVs a useful complement to other holdings. By blending LIVs with direct shares, ETFs and term deposits, investors can design portfolios that are better able to ride out periods of market stress while still generating cash flow. The key is to match the characteristics of each LIV to individual objectives, risk tolerance and tax circumstances, ideally with professional advice.
The next articles will examine governance and pricing, and practical portfolio applications.
