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LICs and LITs

For the benefit of the few readers who may be unfamiliar with these acronyms LI stands for “Listed Investment” and C and T respectively for “Company” and “Trust”.

There are important legal differences between a company and a trust, largely in relation to tax, but these differences are really irrelevant for investors. In essence both involve a pooling of financial resources to make investments on a stock exchange listing.

For some reason that no-one has satisfactorily explained, at least to me, some investors shy away from these ”pooled” instruments of investing simply because the value of the pools (as measured by today’s price on the Stock Exchange) is less than the total value of all the shares that are held by the LIC or LIT.

I wish someone could find for me the company whose “value”, as measured by today’s closing price multiplied by the number of shares on issue, equals the book value of their shares as measured by their balance sheet, with or without an “asset valuation reserve”.