Geoff Wilson declares war on underperforming listed investment companies with LIC of his own
The popular veteran stockpicker will take a ‘carrot and stick’ approach to the LICs he has targeted that are trading below their asset value.
Geoff Wilson is about to go after underperforming listed investment companies, and there’s plenty of supposed star stockpickers in his sights.
Wilson has made his fortune and reputation with Wilson Asset Management. He formed WAM in 1997 and it now manages more than $4bn in assets across various public and private vehicles on behalf of self-funded retirees, who receive franking credit refunds.
He has a penchant for chasing companies that have franking credits on their balance sheets, complementing Wilson’s other pursuit: hunting LICs trading at a discount to the value of their net tangible assets.
And there’s plenty of them at the moment. Hence Wilson’s latest move to form his eighth LIC in WAM Strategic Value, which will launch a $225m raising this week ahead of an ASX listing next month.
It will identify opportunities to, as Wilson puts it, “buy $1 assets for 80c” in underperforming LICs and with a bit of cajoling – “we’ll use the carrot or the stick, though we’d prefer to work with them and use the carrot more,” Wilson says – and encouragement and advice to close the NTA discount gap. With a chuckle Wilson points out that WAM Strategic Value’s ticker will be “WAR”.
Bell Potter estimates the market capitalisation of LICs and listed investment trusts on the ASX at more than $50bn, but of the 100 biggest LICs a whopping 80 per cent are trading at a discount.
Those include LICs managed by stars such as Alex Waislitz, Rob Luciano and plenty of others who have gone from being intensely private to dipping their toes in the waters of public LICs in recent years.
“Most of the fund managers haven’t had experience with listed investment companies before, so what they do is they end up floating and when it lists they think they have won the grand final,” Wilson says.
“In actual fact they have just finished pre-season training and all the hard work is in front of them.”
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Geoff Wilson
- Age: 63
- Lives: Sydney
- Estimated wealth: $526m
- Source: Financial services
- Secrets of success: Garnering a large and loyal following of retiree investors across eight listed investment companies, and delivering regular and growing franking credits
Source: The List – Australia’s Richest 250
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Wilson has a couple of decades of LIC experience and a track record to back up his words. WAM’s seven LICs are all trading at a premium to their NTA. The biggest, WAM Capital, is trading at about a 22 per cent premium, while WAM Research – which looks for undervalued small to medium industrial growth companies – is at 42 per cent.
Wilson says the secret is to get four key strategies right: performance; a steady stream of fully franked dividends, as investors are often self-managed super funds; respecting shareholders; and strong engagement and communication with investors.
“The piece of the puzzle they often miss is the last piece,” says Wilson. “We prefer to be seen as partnering with companies we buy shares in and show them the magic sauce we use.”
Wilson is referring to the hard work he and his team put in with his army of investors, whom he rallied to protest against Labor’s policy of cutting franking credits at the last election.
On a six monthly basis, Wilson will ring his top 20-25 shareholders, his CEO Kate Thorley the next 25, portfolio managers the next 25 and so on down.
“We’re probably touching the top 120 shareholders every six months. We put out a weekly email that has a 50 per cent open rate; we sent 40,000 letters. As human beings one of our biggest drivers is being acknowledged, so we are engaging with shareholders, getting feedback.
“It can take time. With WAM Research it took seven years of communicating with shareholders, finding excuses to ring them, me ringing the top people, doing marketing etc. Now that is the one at the 42 per cent premium.”
Wilson laughs when asked if his new LIC will go after the likes of Waislitz, a friend he once described as “the Warren Buffett” of Australian investing, and Luciano. But he does say existing WAM entities have positions in both their LICs and that situation will likely continue with WAM Strategic Value.
He is a backer of both and respects their stock-picking acumen but says communication with shareholders is key to closing that NTA gap — something that Luciano has publicly acknowledged.
“If it’s Rob’s business they want to touch Rob, investors want to touch Alex. I’m convinced they will get to trade at NTA, if not at a premium. The million-dollar question is when,” says Wilson.
“They are very good fund managers and what needs to happen is the supply/demand equation in terms of the share register has to change for them.
“And that will happen over time, as you continue to perform you find your share register naturally tightens up.
“The ones that don’t want to be there drop off and the believers stay. The question is is there something to do to get it to tighten up quicker.”
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