Monthly Listed Investment Trust Report – Sep 2025

This story features WAM ACTIVE LIMITED, and other companies. For more info SHARE ANALYSIS: WAA

Download related file: IIR-Monthly-LMI-Update_3-September-2025

Independent Investment Research updates developments in Australia's listed investment trust and provides comparative data.

A Listed Investment Company (LIC) is a listed investment vehicle that offers investors access to a diversified portfolio of shares in other companies also listed on the stock market.

Note: For comprehensive comparative data tables for LICs and ETFs please see attached.

Below we provide a summary of the LMI reviews completed since our last newsletter. The reviews include WAM Active Limited ((WAA)), WAM Research Limited ((WAX)), Pengana International Equities Limited ((PIA)) and Argo Global Listed Infrastructure Limited ((ALI)).

WAM Active Limited ((WAA))
WAM Active Limited provides exposure to an actively managed portfolio of predominately ASX-listed securities. The Company can invest in stocks of any size, however the focus of the Company is typically on medium and small cap industrial companies. The portfolio is managed by MAM Pty Ltd (the “Manager”), which forms part of the Wilson Asset Management Group.

The Company seeks to deliver an absolute return with three primary objectives: (1) Deliver a regular income stream in the form of fully franked dividends; (2) Provide a positive return, after fees, with low volatility over most time periods; and (3) Preserve the capital of the Company. In addition to these objectives, the Manager seeks to deliver a portfolio that has a low correlation to the broader equity market.

The Company seeks to achieve these objectives through the investment in a portfolio of predominantly ASX-listed securities using the Manager’s proprietary Market-Driven investment process, which is focused on identifying market mispricing opportunities. Exposure will be primarily long, however the Manager has the ability to take short positions up to 50% of the portfolio value. We do not expect shorting to be a prominent part of the portfolio with the portfolio having less than 10% short exposure throughout its history.

WAA is suitable for those investors seeking exposure to an actively managed investment with an absolute return objective. The Company is suited to those investors seeking equity market exposure with lower levels of risk that are happy to forgo some upside to achieve these objectives.

Given the focus of the Company, the portfolio is not immune to small cap volatility. While the portfolio has had lower volatility than the market over the long-term, investors should be comfortable with the risks inherent in small caps. The Company provides investors the potential to diversify their broader portfolio through a strategy that offers a different risk and return profile to the broader market, which is highlighted by the high tracking error.

The Manager will revert to cash in the event attractive investment opportunities cannot be identified or to reduce market exposure during periods of elevated risks and as such the Company may hold high levels of cash. Investors should be comfortable with the allocation between securities and cash. The Company is not seeking to generate excess returns over the market, so an investment in WAA is not for those seeking an alpha mandate, it is for those investors seeking portfolio diversification.

IIR has maintained a Recommended rating for WAA. The Company provides exposure to a differentiated strategy with an absolute return objective. The Company has achieved its objective over the long-term with the portfolio delivering positive returns over most time periods and outperforming in down markets. However, the delivery of the objectives has been impacted in more recent years as a result of the Manager having higher levels of market exposure, which in part has been to cater to the needs of the increased size of WAM Capital Limited ((WAM)).

The increased levels of market exposure has had an impact on the volatility of NTA returns and has resulted in lower levels of capital preservation being achieved in down markets. The Manager recently made the decision to decouple the management of the portfolio from the WAM portfolio. We view this as a positive, with the expectation that the portfolio will now be able to be managed in a manner to more consistently achieve its investment objectives.

A concern continues to be the elevated yield being paid, which has impeded NTA growth over the long-term and resulted in periods of heightened risk regarding the ability to maintain the annual dividend.

The recent performance of the portfolio has provided some breathing room with respect to the level of dividend coverage in the profits reserve, however will continue to impact NTA and share price growth if the portfolio does not regularly deliver sufficient returns to cover the dividend payment.

WAM Research Limited ((WAX))
WAM Research Limited provides exposure to an actively managed portfolio of ASX-listed undervalued growth companies. The Company can invest in stocks of any size, however the focus of the Company is typically on mid and small cap industrial companies. The portfolio is managed by MAM Pty Ltd (the “Manager”), which forms part of the Wilson Asset Management Group.

The Company has two primary objectives: (1) achieve a high real rate of return, comprising both income and capital growth, within acceptable risk parameters to the Directors; and (2) deliver a fully franked dividend stream.

The Company seeks to achieve these objectives through investment in a portfolio of predominantly ASX-listed securities using the Manager’s proprietary Research-Driven investment process. Exposure will be primarily long, however the Manager has the ability to invest in warrants and options to sell permitted investments (ie. short stocks). The Manager also has the ability to move to cash in the event attractive opportunities cannot be identified or as a result of market conditions.

The mandate is flexible with no stock or sector limitations.

The Company offers investors access to an investment that provides a differentiated risk/return profile to the broader Australian market. This is driven by the focus on mid and small cap stocks and the Manager typically not investing in mining companies. Small cap companies are prone to higher levels of volatility than their large cap counterparts. As such, investors should be comfortable with the potential for heightened levels of volatility in the portfolio.

The Company has offered an attractive grossed-up dividend yield throughout its history with the Company having a healthy dividend coverage based on the profits reserve, however investors should be aware that yields of these levels may be unsustainable and lead to NTA erosion in the event of a prolonged period of market weakness. The Company will hold cash in the event attractive investment opportunities cannot be identified. Investors should be comfortable with the Company allocating between securities and cash.

IIR has assigned WAX a Recommended Plus rating (previously Highly Recommended). WAX provides investors exposure to a portfolio of predominantly domestic mid and small cap industrials that has outperformed the broader domestic equity market over the long-term
and achieved its objective of a high real rate of return. The Company provides an attractive dividend yield, however the elevated yield being paid has led to the majority of investor returns being dividends with the elevated yield weighing on NTA growth.

The yield being paid and the challenging market conditions faced by small caps in recent years has led to the depletion of the franking account with the Company paying partially franked dividends in recent periods. The Company has had to contend with the share price trading at material premiums throughout its history, in part driven by the grossed-up yield. The re-rating of the share price towards NTA, while difficult for investors that acquired shares at higher prices, is a positive for investors moving forward with the share price returns likely to be more correlated with NTA returns now the share price has rebased.

The premium in part, highlights the strength of the Wilson Asset Management Group in the LIC market, with the Group being a stalwart in the LIC market. Current prices provide the ability for investors to gain access to the strategy at appropriate levels, something that
investors have been unable to do for a long period of time.

For more: see full document attached (top of this page).

Independent Investment Research, “IIR”, is an independent investment research house based in Australia and the United States. IIR specialises in the analysis of high quality commissioned research for Brokers, Family Offices and Fund Managers. IIR distributes its research in Asia, United States and the Americas. IIR does not participate in any corporate or capital raising activity and therefore it does not have any inherent bias that may result from research that is linked to any corporate/ capital raising activity.

IIR was established in 2004 under Aegis Equities Research Group of companies to provide investment research to a select group of retail and wholesale clients. Since March 2010, IIR (the Aegis Equities business was sold to Morningstar) has operated independently from Aegis by former Aegis senior executives/shareholders to provide clients with unparalleled research that covers listed and unlisted managed investments, listed companies, structured products, and IPOs. IIR takes great pride in the quality and independence of our analysis, underpinned by high caliber staff and a transparent, proven and rigorous research methodology.

INDEPENDENCE OF RESEARCH ANALYSTS

Research analysts are not directly supervised by personnel from other areas of the Firm whose interests or functions may conflict with those of the research analysts. The evaluation and appraisal of research analysts for purposes of career advancement, remuneration and promotion is structured so that non-research personnel do not exert inappropriate influence over analysts.

Supervision and reporting lines: Analysts who publish research reports are supervised by, and report to, Research Management. Research analysts do not report to, and are not supervised by, any sales personnel nor do they have dealings with Sales personnel

Evaluation and remuneration: The remuneration of research analysts is determined on the basis of a number of factors, including quality, accuracy and value of research, productivity, experience, individual reputation, and evaluations by investor clients.

INDEPENDENCE – ACTIVITIES OF ANALYSTS

IIR restricts research analysts from performing roles that could prejudice, or appear to prejudice, the independence of their research.

Pitches: Research analysts are not permitted to participate in sales pitches for corporate mandates on behalf of a Broker and are not permitted to prepare or review materials for those pitches. Pitch materials by investor clients may not contain the promise of research coverage by IIR.

No promotion of issuers’ transactions: Research analysts may not be involved in promotional or marketing activities of an issuer of a relevant investment that would reasonably be construed as representing the issuer. For this reason, analysts are not permitted to attend “road show” presentations by issuers that are corporate clients of the Firm relating to offerings of securities or any other investment banking transaction from that our clients may undertake from time to time. Analysts may, however, observe road shows remotely, without asking questions, by video link or telephone in order to help ensure that they have access to the same information as their investor clients.

Widely-attended conferences: Analysts are permitted to attend and speak at widely-attended conferences at which our firm has been invited to present our views. These widely-attended conferences may include investor presentations by corporate clients of the Firm.

Other permitted activities: Analysts may be consulted by Firm sales personnel on matters such as market and industry trends, conditions and developments and the structuring, pricing and expected market reception of securities offerings or other market operations. Analysts may also carry out preliminary due diligence and vetting of issuers that may be prospective research clients of ours.

INDUCEMENTS AND INAPPROPRIATE INFLUENCES

IIR prohibits research analysts from soliciting or receiving any inducement in respect of their publication of research and restricts certain communications between research analysts and personnel from other business areas within the Firm including management, which might be perceived to result in inappropriate influence on analysts’ views.

Remuneration and other benefits: IIR procedures prohibit analysts from accepting any remuneration or other benefit from an issuer or any other party in respect of the publication of research and from offering or accepting any inducement (including the selective disclosure by an issuer of material information not generally available) for the publication of favourable research. These restrictions do not preclude the acceptance of reasonable hospitality in accordance with the Firm’s general policies on entertainment, gifts and corporate hospitality.

DISCLAIMER

This publication has been prepared by Independent Investment Research (Aust) Pty Limited trading as Independent Investment Research (“IIR”) (ABN 11 152 172 079), an corporate authorised representative of Australian Financial Services Licensee (AFSL no. 410381. IIR has been commissioned to prepare this independent research report (the “Report”) and will receive fees for its preparation. Each company specified in the Report (the “Participants”) has provided IIR with information about its current activities. While the information contained in this publication has been prepared with all reasonable care from sources that IIR believes are reliable, no responsibility or liability is accepted by IIR for any errors, omissions or misstatements however caused. In the event that updated or additional information is issued by the “Participants”, subsequent to this publication, IIR is under no obligation to provide further research unless commissioned to do so. Any opinions, forecasts or recommendations reflects the judgment and assumptions of IIR as at the date of publication and may change without notice. IIR and each Participant in the Report, their officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law. This publication is not and should not be construed as, an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Any opinion contained in the Report is unsolicited general information only. Neither IIR nor the Participants are aware that any recipient intends to rely on this Report or of the manner in which a recipient intends to use it. In preparing our information, it is not possible to take into consideration the investment objectives, financial situation or particular needs of any individual recipient. Investors should obtain individual financial advice from their investment advisor to determine whether opinions or recommendations (if any) contained in this publication are appropriate to their investment objectives, financial situation or particular needs before acting on such opinions or recommendations. This report is intended for the residents of Australia. It is not intended for any person(s) who is resident of any other country. This document does not constitute an offer of services in jurisdictions where IIR or its affiliates do not have the necessary licenses. IIR and/or the Participant, their officers, employees or its related bodies corporate may, from time to time hold positions in any securities included in this Report and may buy or sell such securities or engage in other transactions involving such securities. IIR and the Participant, their directors and associates declare that from time to time they may hold interests in and/or earn brokerage, fees or other benefits from the securities mentioned in this publication.

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