VGI Partners are at it again, after raising over $500m for their initial globally focused LIC, they are now employing their unique investment approach on an Asian Focused LIC, PL8. We take a look at the offer.
When VGI Partners listed their first LIC, VGI Partners Global Investments (VG1) in 2017, investors scrambled to gain access to their successful global strategy, with the fund raising over $500 million, overnight becoming one of Australia’s largest LICs.
Since listing, VG1 has raised additional capital, to now sit at the $935m in size mark, to now be Australia’s 12 largest LIC. Additionally, fund manager VGI Partners have recently floated their business on the ASX, with part of their IPO the promise of more LICs. Today we take a look at their new LIC offering, VGI Partners Asian Investments, with the proposed ticker VG8. VG8 has reportedly already passed the $500m mark in commitments.
Prior to the launch of VG1, VGI partners investments were not available for retail investors, with their funds restricted to high net worth individuals and family offices. That changed with the launch of VG1, and with VGI Partners themselves now listed on the ASX, they are now one of Australia’s largest listed fund managers, with $2.6 billion in funds under management. Double that of when we first looked at them at the VG1 IPO in 2017, where they managed around $1.3 billion of assets.
VGI Partners investment style is high conviction, focusing on a small number of high quality companies, are contrarian in nature and will selectively short companies that they identify as structurally weak. They focus on companies with simple to understand businesses and structural ‘moats’, reducing competition.
VG8 will employ VGI’s investment strategy in the Asian region. Unlike many funds focusing on the Asian region, the fund will at least initially, focus on the developed markets of Asia, including Japan, South Korea, Singapore, Hong Kong, Taiwan and Australia. Less developed but often perceived as high growth countries such as China, Thailand and the Philippines are not in scope.
Staying true to label, VG8 will also only invest in the Manager’s best ideas, aiming for 15-30 investments within the portfolio. They will also avoid companies that operate in cyclical industries, ‘boom-bust’ technology companies and companies whose success relies on short term fads. VG8 will have some short selling.
Management fees are on the high end of the spectrum, at 1.65% per annum including GST, with performance fees of 15% + GST of the total portfolio performance over 6 months, subject to a high water mark. This means that performance fees kick in not based on outperforming a benchmark, but kick in based on any positive performance. Strong performance if VG8 = lots of fees for VGI
New LICs have tried many tactics to entice investors into their products. Everything from ‘bonus’ options through to additional units have been tried. VGI Partners are trying yet another approach, with investors in the IPO granted ‘alignment shares’ in VGI Partners themselves. Based on the closing price of VGI Partners on 7 October 2019, for every $10,000 invested in the offer, investors would receive $906 or $544 VGI shares, depending on whether they are participating in the priority offer (available for existing VG1 and VGI shareholders) or the general offer.
When it comes to LICs, there are 4 LICs on the ASX that focus on Asian Equities. These include well known fund manager Platinum’s Asian LIC, PAI, as well as offerings from Ellerston (EAI), Evans & Partners (EAF) and PM Capital (PAF).
There’s also a number of Asian ETFs available on the ASX, with 15 ETFs with Asian exposure. These represent a combination of everything from single country focused through to Passive, Smart Beta and Active strategies.
This post was prepared with publicly available information available from VGI Partners. ETF Watch did not receive any payment from VGI for this post.