Updated Views on WAR

As someone who considers themself to be a value oriented investor I've been increasingly drawn to discounted smaller REIT'S and LIC'S in the past year as my preferred large cap compounders (SOL/WES/SVN/BKW) are trading at such high valuations that it's hard for me to consider further investment.

Unlike some I consider LIC'S to have an ongoing place in the market and if anything the rise and rise of ETF'S (which I was shocked to learn now have a combined valuation of between 3 and 4 times the combined market cap of LIC'S in Australia already) should help keep the active fund managers more accountable in terms of both fees and performance as they compete for a shrinking pool of available capital. I don't think we'll ever see a flood of new fund listings again and they might remain unfashionable with younger investors but that's not really required for them to still be a worthwhile investment particularly when considered in the context of an overall index that's at an all time high.

As is evidenced by the recent attention his new twitter feed has drawn Geoff truly has a brain for marketing and I do tend to agree with some of his bullish points on LIC'S in particular their ability to manage risk in a different way (due to many of the developed world indexes becoming increasingly top heavy with mega cap companies) and smooth out fully franked dividends over time (providing a consistency of income that I know many retirees value). There's still some clear pros and cons to both in my view.

The question is whether WAR is the best way to make a centralised contrarian investment in this discounted area of the market or whether it's better to do this directly as an individual investor with more concentrated bets on a couple of particular well understood favourites in the space (this is how I've approached things so far in the REIT space with mixed success via TOT and DXC). I think if I was to have the capital I would probably go with BKI as a large cap pick (currently trading at a 12 year record discount to NTA around the 10% mark) and considering I already hold WGB for global exposure maybe something like a TOP domestically (although I know the fees over there are pretty brutal and that's been a big contributor to the crazy discount).

One thing I really wish these funds would stop doing is hiding behind alphabetical listings of their portfolios as it makes it really hard to clearly establish what an investor is buying and how sound the NTA discount actually is (for example on the surface a fund may be trading at a 20 percent NTA discount but if the shares in the portfolio are trading on high multiples to earnings then that NTA discount could evaporate quickly in a correction).

Do you guys see a world where WAR is able to justify it's relatively high management fee and performance fee? It's clearly possible if you look at Saba over in the US for a comparison.