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 long-term, shareholder aligned outcomes.
For engaged shareholders, transparency and governance are as important as returns. LIVs, as listed entities, provide regular reporting and continuous disclosure obligations under ASX rules, offering investors clear visibility into portfolio positioning, performance and key risks. Many publish detailed portfolio updates, investment commentary and educational materials that can help shareholders understand how their capital is being deployed.
From a governance perspective, LICs are companies with boards elected by shareholders, who oversee investment management arrangements and broader corporate matters. LITs operate as trusts, with responsible entities and trust deeds that set out duties and obligations to unitholders. This gives investors familiar levers – such as voting at meetings, engaging with directors, or monitoring fees and performance – that align with ASA’s advocacy for robust governance and shareholder rights.
Pricing is another distinctive feature of LIVs that ASA members should understand. Because LIV shares or units trade on the ASX, market prices can be above (a premium) or below (a discount) the underlying net asset value (NAV) of the portfolio. Discounts and premiums can reflect market sentiment, liquidity, performance history, fees and expectations about future returns or corporate activity.
For thoughtful investors, this creates both risk and opportunity. Buying at a discount may offer a margin of safety and potential upside from the higher volume of assets generating investment return, while paying a large premium can introduce additional downside risk even if the portfolio performs well. Incorporating an understanding of NAV, discounts and premiums into due diligence can therefore be an important part of assessing whether a particular LIV deserves a place in a portfolio at a given time.
The next article will examine practical portfolio applications.
