Prior to the allowance given at the AGM to be able to buy back 25% of all shares in a 12-month period, the discount was generally 18%. As I write it has just popped under 10%. So it depends on what time frame you refer to, I think of the gap as shrinking.
Yes the buy back is a huge part of the volumes going through in the last year. This is very accretive to NTA and the fund size is still well over half a billion. Plenty of liquidity, ample scale to keep fixed costs of running a LIC sensible.
I cannot see any problem for them to simply buy back more shares the following year in a similar manner.
Those that are against buybacks of LICs of this size, (above $500 mill), are mainly those that make a living off fee revenue from increased AUMs within LICs. Their "proof" that buybacks do not work, consist of referring to poorly implemented buybacks, i.e. clayton's buybacks that accumulate perhaps 3-5% of stock within a 12 month period at the most. If I was running the large Wilson LICs which some trade at large discounts and benefited from the fee revenue, I would also push this myth at every opportunity.
We simply never get to see a LIC take a buyback seriously, perhaps at least until right now with VG1.
If a continued buyback eventually makes this LIC too small ( I am not sure exactly what figure that is, but lets pluck a number out and say lower than $300 mill), then it could be very easy for PGF to digest via a takeover by then, which may make sense for all. Possibly that makes sense now.
VG1 Price at posting:
$2.01 Sentiment: Hold Disclosure: Held
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