A listed investment company (LIC) is an investment fund which is listed on the Australian Securities Exchange. It is a closed-ended fund, which means that new investors participate by buying shares in the LIC from other investors.
While the price at which an investor buys shares in the LIC will be determined by the market, it will relate to the LIC’s Net Tangible Asset (NTA) value. The NTA is the value of the LIC’s assets (or investments), divided by the number of shares on issues. Sometimes, LICs will trade on the ASX at a ‘premium’ to their NTA, at other times at a ‘discount’ to their NTA.
The closed-ended structure of the fund allows the manager to focus on long-term investment, without needing to consider money coming into or out of the fund. However, the manager will occasionally issue or cancel shares, if they wish to alter the size of the fund.