As highlighted in the AFR last month, we have yet another LIC coming, so I thought I'd hare a few thoughts based on the information available to date.
The LIC, Plato Income Maximiser will presumably mimic the equity income strategy Plato run in their managed fund (Plato Australian Shares Income Fund). The difference it seems is that the LIC will pay dividends monthly while the fund pays quarterly. The strategy is long-only equities so no derivative overlay like some in the equity income space.
Plato manage the fund particularly for zero tax rate investors. Portfolio turnover is pretty high (150% - 200% per year) but they also harvest a lot of franking credits as part of their strategy had a dividend run-up element.
So how has the fund performed? Their objective is twofold, to generate an annual gross yield (incl. franking) over the gross yield of the S&P/ASX 200 and to outperform the S&P/ASX 200 Index after fees. Results as at 31 Dec 2016 are:
Overall, not bad. But below their own internal target which is 3% over benchmark. So how does it compare to their peers? Basically they look about mid-range over time. But, the only way to get the true picture would be to include franking for all of them (industry performance reporting standards do not include franking).
The Plato team are very solid, stable, lots of experience with a robust, repeatable process. It's quite heavily quant driven unlike some of their peers. An interesting issue to consider is that Plato are running a fair bit of money in their managed fund, and are getting close to capacity. If the LIC raises the full whack, it's possible they might shut the managed fund off to new applications.
Overall at this stage, one to watch. If it falls to a discount, you could really start to get some punchy yields coming out.
