Investing in LICs and LITs

Australian share funds, investing principally in ASX-listed shares, represent the largest range of LIVs available on ASX. The range of options includes large cap, mid cap and small cap funds. There are also funds that focus on specific sectors, such as resources.

International share funds invest principally in shares listed on international stock exchanges. They can be an easy way to access international markets in one transaction whilst also benefiting from professional management. A consideration is the foreign currency exposure which may negatively impact investment values and returns. 

Fixed income funds can help investors access a more reliable income stream with typically less price volatility than other classes such as shares. This is why investing in this asset class is often referred to as defensive. Typically a fixed income fund will distribute regular income, but this is conditional on performance.

Funds that provide exposure to fixed income securities may hold a wide range of security types. This may include a portfolio of debentures or bonds which can be issued by domestic or foreign governments, semi-governments or corporates. The fund may hold debentures or bonds with various maturity dates, risk factors and credit ratings.

Investors should consider the risks associated with this type of asset class before investing.

Specialist funds are funds that invest in specific market sectors such as mining, infrastructure, certain types of property and fixed income. This may include alternative assets such as private equity or private debt. 

There is a wide variety of investment styles available on ASX. Funds can be managed to invest in companies that exhibit certain fundamental characteristics, such as companies that exhibit 'value' or 'growth' characteristics. Funds may adopt a 'contrarian' investing style, or look to achieve a specific investment outcome, such as high yield or income.

When deciding whether or not to invest in a LIV, investors should consider whether the fund’s structure, investment style and underlying portfolio suits their investment objectives.