Listed Investment Trusts (LITs): The Recovery Continues
About the author:
- Author name:
- By Parveer Bassi
- Job title:
- Transaction Analyst, Fixed Interest
- Date posted:
- 16 February 2021, 5:00 PM
- The prices of the LIT sector have recovered strongly from the oversold
levels seen last year in mid-March. MXT is now trading at a consistent
premium to its Net Tangible Asset (NTA) with GCI and PCI following close
behind as the discounts on all LITs have narrowed significantly.
- While some securities continue to trade at modest discounts to their
respective NTA values, it is pleasing to see that NBI’s NTA now sits above
the $2.00 issue price, as do those of MXT and GCI.
- The LIT sector has provided investors with a consistent and stable flow of
distributions and remains an attractive income opportunity to further
- With GCI’s NTA value remaining stable and the NTAs of NBI and KKC
closing in on their issue prices but still trading at discounts we retain Add
ratings on these LITs which currently represent excellent value offering
NTAs have recovered back to their initial issue prices
Equity and credit markets were severely impacted by the COVID-19 pandemic in
2020. Risk sentiment deteriorated during the month of March as fears over the
potential impact on financial markets mounted leading to a large sell-off in global
markets. The sell-off across asset classes was accentuated as open-ended global
fund managers became forced sellers of investments at distressed prices to fund
investor redemptions causing substantial price dislocation.
This price dislocation impacted the market price of the underlying assets of the
global LIT managers: KKR, Neuberger Berman (NB) and Partners Group. NTAs
fell ~30% due to mark-to-market losses (but importantly not realised losses). The
ASX prices of LITs fell dramatically with investors selling units at lower prices to
gain liquidity in an uncertain market leading to large discounts to NTA values as
shown in Figure 1.
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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.
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