One of the biggest LIC IPOs of the year, Absolute Equity Performance Fund Ltd (AEG) today had its first day of trading on the ASX. Raising $100m capital, the IPO was reportedly 3-4 times oversubscribed.
Whilst the fund is new, the name behind it certainly isn't. The new fund is the latest offering by Australian funds management bohemoth Bennelong (with over $6b of funds under management), and is based on the Bennelong Long / Short Equity Fund which has reported an impressive 19.4% annual return fo the last 10 years, compared to 5.3% for the ASX All Ordinaries Accumulation Index. The latest offering gives retail investors the ability to invest in a fund traditionally reserved for wholesale investors only.
AEG was listed with a share price of $1.10 and a Net Asset Value of $1.079. It closed day one of trade at $1.15, an impressive 6.2% higher than its NAV (ignoring any underlying performance from the first day's trade). Investors in the IPO are also entitled to an option for every share purchased with a strike price of $1.10.
Time will tell if AEG can retain its premium to its NAV. If it continues its impressive outperformance expect it to stay up there, however LIC prices are susceptible to large swings in their price to NAV/NTA ratios depending on short term performance. This can particularly be true for long/short managers whose performance often won't track the underlying benchmark return (refer to ALF earlier this year when it had period of underperformance). The outstanding options will also put a dampener on any outperformance once they vest. For anyone wanting a piece of AEG it will be worth keeping an eye on performance and NAV over the next 12 months.