WAM Global merges with rival Templeton in latest LIC reshuffle

The deal comes a day after the IPO of TGG’s largest shareholder: WAM Strategic Value, another Wilson LIC, which was listed on Monday with a 14.7% stake in Templeton’s portfolio.

“Since 2019, Wilson Asset Management has been a buyer of TGG as its discount has continued to widen,” said the company in the prospectus for WAM Strategic Value, which trades under the symbol WAR.

Wilson Asset Management supported the addition of a new independent director for TGG, which presaged the strategic review, the company said.

The deal marks a departure from the LIC market for Franklin Templeton, headquartered in San Mateo, Calif., Which is one of the world’s largest fund companies overseeing $ 1.4 trillion ($ 1.8 trillion) of assets.

The local branch of the American manager manages the LIC portfolio which bears part of his name and which marked 34 years on the local stock market last month.

Templeton Global Growth, which trades under the symbol TGG, started the month 8.3% below its total portfolio assets. LIC has traded below the value of its holdings since December 2014, according to monthly data from broker Bell Potter.

TGG’s biggest holdings were JPMorgan, the US investment bank, Samsung and Taiwan Semiconductor Manufacturing Company, according to the portfolio’s latest quarterly report.

By partnering with WAM Global, the transaction removes another LIC from the market when the listed portfolio structure is consolidated.

At the start of last year, 108 LICs were trading on the ASX, but at the start of the month there were 10 fewer, according to Morningstar figures.

The ranks were further refined until June when Milton, a $ 3.3 billion portfolio, agreed to merge with Washington H. Soul Pattinson, and Monash Absolute Investment Company transformed into an exchange-traded fund at active management.

The deal signals the intention of WAM’s new offering which will take stakes in underperforming competitors in the hope that they will reduce the discount on their assets.

Most PFRs trade below the value of their assets, penalizing investors who have to sell their shares at a discount.

Critics of the LIC model have long argued that the structure benefits fund managers rather than investors.

PFRs lock in investor capital against managed funds and exchange-traded funds that create and redeem stocks as investors come and go, closely tracking the value of the fund’s assets.

Of the 98 LICs listed at the end of May, 82 traded at a discount, according to Morningstar data, with an average spread of 10.8%.

WAR has taken positions in leading portfolios including VGI Partners Global Investments, a $ 920 million LIC operated by Rob Luciano’s VGI Partners, and the Magellan High Conviction Trust, a $ 850 million portfolio.

By taking stakes in its rivals, WAR will balance the roles of competitor and shareholder among the PFRs in its portfolio, and may even offer advice to help them reduce their discounts.

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