LICs Explained: What is a Listed Investment Company (LIC)?
Listed investment companies (LICs) offer a convenient way to access an actively managed portfolio of investments.
What are listed investment companies?
Listed investment companies (LICs) trade on the ASX and typically offer access to a portfolio of stocks.
LICs are structured as companies, which means they can retain profits from year to year to smooth out the income paid to investors. They also pay company tax. This allows LICs to distribute after-tax income to investors as franked dividends. Investors can use franked dividends to offset tax.
How does a listed investment company work?
LICs typically own a portfolio of stocks, with many of the largest LICs holding significant stakes in ASX-listed blue chips like Commonwealth Bank ($CBA) and BHP ($BHP). LICs make money for their shareholders through capital gains on their investments and through dividend payments from the stocks they own.
LICs vs LITs
LICs | LITs | |
|---|---|---|
Legal structure | Structured as a company | Incorporated as a trust |
Tax treatment | Pays tax at the company level, may distribute franked dividends | Pay no tax, but investors pay tax on income. No franking credits. |
Income stability | Retained profits can smooth dividend payments | Distributions can vary depending on income |
Management | May be internally or externally managed | Usually externally managed |
Costs | Costs included in expenses for internally managed LICs | Fees for the external manager are disclosed in the PDS |
Liquidity | Trades on the ASX like a stock | Trades on the ASX like a stock |
Net tangible assets | Price can trade at a discount or premium to NTA | Price can trade at a discount or premium to NTA |
How many LICs are there in Australia?
There were 88 listed investment vehicles – both LICs and LITs – on the ASX at 30 April, 2025.
The three biggest LICs in May 2025 were Australian Foundation Investment Company ($AFI), Argo Investments ($ARG) and MFF Capital Investments ($MFF). We've compiled a list of the top 10 listed investment companies in Australia.
What are the advantages of a listed investment company?
LICs offer an actively-managed and diversified portfolio rather than a passively-managed portfolio that tracks an index like an ETF.
They typically have lower fees compared to managed funds. LICs offer transparency as investors can track prices and performance on the ASX. Some LICs pay franked dividends.
How do listed investment companies compare to similar assets?
LICs | ETFs | |
|---|---|---|
Structure | Operates as a company listed on the ASX | Structured as a trust on the ASX, tracks an index or asset class |
Investment style | Actively managed with decisions made by internal or external managers | Mainly passively managed to track the performance of an index |
Tax | Pays corporate tax at 30% and may pay franked dividends. Tax on capital gains. | Investors pay tax on capital gains and income. Franking credits may not be available. |
Costs | Low management expense ratios if internally managed. | Low management fees, especially for popular index ETFs. |
Liquidity | Good liquidity as shares are traded on the ASX | Good liquidity as shares are traded on the ASX |
Minimum investment | The ASX requires a minimum investment of A$500 (excluding brokerage) when purchasing shares in any ASX-listed security for the first time. The minimum value of subsequent buy orders is A$20. | The ASX requires a minimum investment of A$500 (excluding brokerage) when purchasing shares in any ASX-listed security for the first time. The minimum value of subsequent buy orders is A$20. |
✅ Learn more: What is the difference between LICs and ETFs?
Things to consider before investing in LICs
Understand the assets
Know what the LIC invests in – shares, property, fixed income, etc – and make sure it fits your portfolio and investment objectives. Understanding the mix helps avoid unintended concentration or overlap.
Investment strategy
Assess whether the LIC aims for growth, income, or capital preservation. A clear, consistent strategy signals disciplined management.
Management quality The manager’s track record and reputation matter. Past performance isn’t everything, but it often reveals how they navigate different types of market conditions.
Performance metrics
Don’t just look at the share price: review the performance of the underlying portfolio too. A falling price may not reflect poor asset returns, but shifting investor sentiment or NTA changes.
Dividend policies
Some LICs smooth income by using profit reserves to pay regular dividends. If income stability is important to you, this feature may be attractive.
NTA discounts/premiums
Be aware of how far the LIC's share price strays from its NTA. Buying at a big premium can backfire if the price drifts back toward NTA, while a discount could be an opportunity - or a warning sign.
Liquidity and size
Smaller LICs may be harder to buy or sell without moving the price. Larger ones typically have more active markets and tighter bid-ask spreads.
Fees
Understand all costs, including management and performance fees if the LIC uses external managers. Low fees don’t always mean better value if performance suffers.
Corporate governance
A strong board protects shareholder interests, especially important for decisions on capital raisings and managing persistent discounts. Good governance ensures alignment between managers and investors.
LICs FAQs
Most LICs have low management expense ratios as the cost of managing the portfolio is part of the normal costs of operating a company (the managers are employees).
However, some LICs are externally managed: this usually involves the payment of a management fee – and possibly a performance fee – to the external manager.
ETFs offer low cost access to broad market indices like the S&P/ASX 200. Their performance will track the index minus a low annual fee.
LICs have higher fees, but they can either underperform or outperform the index.
The Vanguard Australian Shares Index ETF ($VAS) – the largest ETF listed on the ASX – is up 4.5% so far this year compared to a 1.3% decline in Australian Foundation Investment Company ($AFI), the largest LIC on the ASX.
Disclaimer
The information contained above does not constitute financial product advice nor a recommendation to invest in any of the securities listed. Past performance is not a reliable indicator of future performance. When you invest, your capital is at risk. You should consider your own investment objectives, financial situation and particular needs. The value of your investments can go down as well as up and you may receive back less than your original investment. As always, do your own research and consider seeking appropriate financial advice before investing.
Any advice provided by Stake is of general nature only and does not take into account your specific circumstances. Trading and volume data from the Stake investing platform is for reference purposes only, the investment choices of others may not be appropriate for your needs and is not a reliable indicator of performance.
$3 brokerage fee only applies to trades up to $30k in value (USD for Wall St trades and AUD for ASX trades). Please refer to hellostake.com/pricing for other fees that are applicable.
