LIT delisting simplifies Forager: CIO

Forager Funds Management's chief investment officer is urging investors to vote in favour of delisting a troubled listed investment trust (LIT) in a bid to simplify the business.

Chief investment officer Steve Johnson wrote to investors that if the Forager Australian Shares Fund (FOR) is delisted, the fund manager will go back to running "two simple open-ended funds with the same Responsible Entity and registry, both accepting daily applications and redemptions."

In June, unitholders will decide on the fate of FOR and if it should delist from the ASX.

FOR has traded at an average discount of more than 14% to net asset value in the six months before it announced the intention to delist last October.

It was trading a $1.48 per share at the time of writing, peaking about at $2.09 in 2018.

FOR has returned 19.8% in the last year and 9.5% p.a. since its 2009 inception.

"The 2019 financial year handed us some important lessons about the importance of portfolio liquidity that had nothing to do with redemptions. Liquidity - or trading volume in the underlying investments - allows us to exit investments that aren't working out and take advantage of market dysfunction when it arises," Johnson said.

"We learned back in 2019 that we need more of it to optimise portfolio performance. A side benefit is that we can also manage any redemptions that have come our way, especially given the diverse and loyal nature of Forager's investors."

Johnson added that while there are good arguments to consider on both sides, he came to the "conclusion that the downsides of an entrenched discount and lack of liquidity for the listed units outweigh the portfolio management benefits by some margin."

The fund manager also runs the Forager International Shares Fund, which invests in global small and mid-cap stocks. It has returned 28.2% in the year to March and 12.9% since it was incepted in 2013.