I think an important consideration for any closed end vehicle, whether it be an LIC or LIT, is the power of market sentiment. Take a look at the latest report into LICs and the average discount to NAV. You will find a long list of LICs that have returned average returns, sometimes even above index (not fantastic) and are still plagued by consistent and significant discounts to NAV. This (I think) is the major set back to LICs. Yes, I agree with the comments made by WangChung... all are valid... Especially in a broad market sell off. But, you really need to reassess buying into an LIC over a managed fund based purely on discount/premium. Both have their advantages and disadvantages... but like what has been stated by Occam Logic, there is no guarantee the LIC will return to Par just because of the NAV of the managed fund. I think you are better off assessing what your priorities are for the investment. For some people that is franked dividends and stability of the capital within the fund (LIC).... others prefer to know their investment will be worth what it holds and not deviate every time the market finds the next best thing (M Fund). Despite the disadvantages of open ended trust structures, I like to know that I hold a beneficial interest in both the capital and income of the trust... which ultimately means I can redeem my units should I wish. The constraints of being a shareholder in a company (LIC) are often misunderstood and poorly explained... particularly the fact you merely have a residual claim to the assets of the company should it be liquidated or wound up. This ultimately means you are at the mercy of the secondary market in determining how much your investment is worth.. and as can be seen by reviewing the data... most of the time (with the exception of WAM LICs) this varies... with the majority currently being at a discount.
