Antipodes exchanges a LIC for ETF structure

Antipodes Global Investment Company (ASX: APL) has announced a scheme of arrangement to allow shareholders to hand in their shares in the APL listed investment company (LIC) for units in a new exchange-traded fund (ETF), Antipodes Global Shares (ASX: AGX1). The decision comes after years of  the LIC trading at a discount to its net tangible asset (NTA) figure, and amid a surge in potential conversions for the much-maligned part of the investment sector.

In a positive move for impacted shareholders, the number of units received in the AGX1 ETF will be based on APL’s net tangible assets (NTA) relative to AGX1’s net asset value (NAV) at the time of implementation. That is, the conversion will be based on the net value of APL’s assets, not on the discounted daily traded share price.

The LIC and ETF are both similar investment vehicles, seeking to build a diversified portfolio of global shares with Antipodes ‘pragmatic value’ approach to selection. However, the major difference is that the APL LIC is a long-short product, while AGX1 is a long-only product. Interestingly, the long-only product has outperformed consistently.

The independent board has voted in favour of the scheme and says it is proposed to be a straightforward and very low-cost means of enabling shareholders to exit APL at close to the fund’s NTA, and to maintain access to the manager’s investment strategy through an ETF.

If implemented, APL shareholders can:

• Continue to access to Antipodes’ value-oriented global investment strategy through an ASX-listed vehicle with similar benchmark, fees and objective to APL; and
• Hold a security that will trade closer to NAV; or
• Sell that security at close to NAV (subject to a bid-ask spread)

Antipodes is the latest fund manager looking to exit from an LIC structure that has been trading at a discount to NTA for a long period of time. It joins the likes of Monash Investors, which has grown weary of the structure at a time when Wilson Asset Management is more aggressively targeting those products with discounts. The proposal comes despite Antipodes having been on the front foot trying to reduce the discount for some time.

According to Perpetual, “There are currently 101 closed-ended exchange-traded products, made up of LICs and LITs with a market value of $54.5 billion. As at April 2021, 81 per cent of these were trading at a discount to NTA, and for 47 of these products the discount to NTA was greater than 10 per cent.”

While it’s common to see a LIC trading at a premium or discount to NTA, a discount of up to 50 per cent with multiple cycles in between is simply too long, and is a security that is trading irrationally. These discounts are leading to the rise in ETFs and ETMFs because of their structure.

The deal is expected to be implemented in early to mid-December 2021. 

Ishan Dan

Ishan is an experienced journalist covering The Inside Investor and The Insider Adviser publications.