Monthly Listed Investment Trust Report – Oct 2025

This story features WAM ACTIVE LIMITED, and other companies.
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Download related file: IIR-Monthly-LMI-Update_7-October-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.

WAM Capital Limited (ASX: WAM)

WAM Capital Limited (ASX: WAM) provides exposure to an actively managed portfolio of predominantly Australian securities. The Company has a track record of over 25 years, listing on the ASX in August 1999.

The Company has grown materially throughout its history driven by mergers and acquisitions, placements, bonus option issues and portfolio performance with WAM being the sixth largest LIC by market cap as at 30 June 2025. The portfolio is managed by Wilson Asset Management (International) Pty Limited, which forms part of the Wilson Asset Management Group.

The Company has three primary objectives: (1) provide capital growth for investors; (2) deliver a stream of fully franked dividends; and (3) preserve the capital of the Company. The Company seeks to achieve these objectives through investment in a diversified portfolio of Australian and New Zealand listed securities using a combination of the Manager’s proprietary Research-Driven and Market-Driven investment processes.

The Company has a flexible mandate with few limitations. 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. The Manager will revert to cash in the event attractive investment opportunities cannot be identified or to preserve capital.

WAM is suitable for those investors seeking exposure to a highly diversified, actively managed portfolio of predominantly domestic equities with a focus on mid and small cap stocks. The Company would be suitable to be used in combination with an investors core large cap focused investment with WAM providing a differentiated portfolio to the broader Australian market as shown by the high tracking error of the portfolio compared to the S&P/ASX All Ordinaries Accumulation Index.

The Company provides access to both the Research-Driven and Market-Driven investment processes as opposed to a single strategy which is provided through WAM Active Limited ((WAA)) and WAM Research Limited ((WAX)).

The Company has offered an above market dividend yield throughout its history, however we have concerns regarding the ability of the Company to maintain the dividend over the long-term and as such investors should be comfortable with the potential for some dividend volatility in the event of a period of market weakness.

IIR has maintained a Recommended Plus rating for WAM. The Company provides investors exposure to a differentiated portfolio that cannot be replicated by a passive investment vehicle. On a total return basis, the Company has delivered NTA returns slightly above its benchmark, the S&P/ASX Ordinaries Accumulation Index. It has delivered these returns with very little exposure to top 50 stocks, which represent a large portion of the benchmark.

NTA returns have been strong when compared to market indices that are more aligned with the investment universe of the Company. The Company has grown materially since listing which has delivered benefits for investors, however has provided challenges from a capacity perspective given its focus on mid and small caps.

The high level of dividends being paid has assisted with capacity constraints, however the elevated yield being paid has impeded NTA growth and therefore capital growth for investors. Dividends will continue to weigh on NTA growth while they remain at these elevated levels with the Board continuing to maintain the dividend until reserves are exhausted and the Board is forced to cut dividends.

Risks surrounding the ability to maintain dividends was one of the contributors to the share price re-rating from a material premium to NTA in recent years. This led to a dislocation in the NTA and share price return in the medium term, however now that the share price has rebased we expect share price returns to be more correlated with NTA returns.

WAM Microcap Limited (ASX: WMI)

WAM Microcap Limited ((WMI)) provides exposure to an actively managed portfolio of primarily ASX-listed micro-cap stocks. The Company defines micro-cap stocks as stocks with a free float adjusted market cap of less than $300 million at the time of investment. The portfolio is managed by MAM Pty Ltd, which forms part of the Wilson Asset Management Group.

The Company seeks to deliver investors a stream of fully franked dividends, provide capital growth over the medium-to-long term and preserve the capital of the Company. The Company seeks to achieve this objective through an investment in a portfolio of micro-cap stocks using a combination of the Manager’s proprietary Research-driven and Market driven investment approaches.

While the Company will focus on ASX listed micro-cap stocks, the Manager can invest in stocks on international exchanges and unlisted companies that are expected to be listed within 12 months at the time of investment. The Manager can short up to 50% of the portfolio value, however shorting is not expected to be a prominent part of the portfolio.

The Manager will revert to cash in the event attractive investment opportunities cannot be identified or as a result of market conditions.

WMI is suitable for those investors seeking to incorporate micro-cap exposure into their broader portfolio, which can inject additional returns to a portfolio however also typically encompasses higher levels of risk. While micro-cap stocks are typically less liquid than larger cap stocks, they are less researched and can have greater levels of mispricing by the market offering the potential for significant returns for those who can effectively manage risk and identify winners.

The Manager has the ability to short stocks through the investment mandate, however, short positions in the portfolio will likely be insignificant at any given time given the enhanced risks of shorting stocks in this segment of the market.

Nonetheless, investors should be comfortable with the prospect that the portfolio may incorporate short positions. The Company provides investors differentiated exposure to the benchmark index as is highlighted by the high tracking error and cannot be replicated by a passive fund. The Company provides investors exposure to a micro-cap portfolio with an above market dividend yield, providing investors an income stream that potentially offsets the heightened volatility in the portfolio.

IIR has maintained a Recommended Plus rating for WMI. The Company has delivered on its investment objectives and continues to be in the top tier performers relative to its peers over the long term. After trading at a material premium for a prolonged period of time, the share price has rerated back to NTA.

This is a positive, providing investors the opportunity to acquire shares around NTA, something which investors have not been able to do for a number of years. The Company provides an attractive grossed up dividend yield and has a healthy level of dividend coverage in the profits reserve, however the yield is elevated and the Company will need to manage further increases to ensure that dividends are not paid at the expense of NTA growth.

We view the Company as an attractive investment for those seeking exposure to micro caps, however investors should pay attention to the share price in relation to the NTA with increased risks associated with LICs trading at material premiums.

Re-published with permission. To download full document: see link near the top. Views expressed are not by association FNArena’s.

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