Melbourne Cup of LIC's, page-8

why would AFI ever trade at a discount to post tax NTA when they are similar the Berkshire “hold forever” model. They will only pay tax on their positions if they liquidate when they do not have any intention in doing so. LIC’s such as AFI/ARG also qualify for the LIC capital gain tax deduction where the LIC’s you mentioned do not.

The LIC’s you mention are “value” models and yes as everyone know’s value investing returns have been poor for the last few years. My issue is primarily with the high fee structure that tends to plague LIC’s hence the discount’s to NTA seem to reflect the market’s opinion of the “fees baked in” and hence a factor in the LIC trading at a discount to NTA. Put that together with poor performance and you are on a hiding to nothing.

You also mention about “downside protection” which I believe is a myth. In a bear market everything is going down. One might say that defensives, shorting or derivatives for instance would be “downside protection”, but name someone who has consistently made a “top of market” or “bottom of market” call? Even if you could achieve this impossible task, you would still need to get the individual stocks or markets calls correct in relation to your “downside protection”.