Adviser, SMSF demand driving LIC growth

Financial advisers and self-managed super funds are helping drive the strong demand for listed investment vehicles offering wider asset classes and a more diversified portfolio, according to a MinterEllison report.

The Australian listed investment companies (LICs) or listed investment trusts sector rose by 12.3% in market capitalisation to $33.1 billion during FY17. The period saw 12 LICs launch, bringing the total number to 102, MinterEllison's Capital markets report shows.

The exchange-traded products (ETPs) market meanwhile delivered a 30% boost, reaching $29.2 billion in assets as a result of 25 ETPs that launched. Ten years ago, the market capitalisation of ETPs in Australia was under $1 billion.

More broadly, the amount of equity raised reached $51.8 billion, down 24.7% year-on-year, while the market cap of initial public offerings slumped 39.6% to $14.2 billion.

Equity capital raised via share placements on the other hand jumped by 58.6% to $20.6 billion.

Notable companies that listed include Antipodes Global Investment Company ($313m), Plato Income Maximiser ($325.9m) and Viva Energy REIT ($91m) among others.

MinterEllison also reported the major banks each having to raise between $3 billion and $5 billion in additional capital due to APRA lifting capital adequacy requirements from 9.5% to 10.5%.

"The banks will need to raise significant additional equity to achieve this, although this may be achievable by building more equity organically through retained earnings rather than mounting equity capital market raisings," the report said.

Total foreign listings on the ASX stood at 266, up 50% since 2013.

On the debt side, MinterEllison partner and equity capital markets and corporate bonds sector specialist James Hutton said the simple corporate bonds (SCB) market struggled since the issue of Australia's first SCB in FY16.

"We have not seen the much hoped-for flurry of activity of issuance in simple corporate bonds. In fact, we don't expect use of SCBs to become widespread until Treasury gives it parity with equity raisings rules. Essentially, the market is looking for a level playing field," he said.

It was a different story for retail corporate bonds in FY17 with logistics firm Qube Holdings issuing $200m of subordinated debt in August 2016, Hutton added

Read more: MinterEllisonLICAntipodes Global Investment CompanyASXJames HuttonPlato Income Maximiser
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