InvestSMART Australian Equity Income Fund (Managed Fund) (Proposed ASX Code: INIF)

 
Benefits of Investing in a Listed Fund: InvestSMART Australian Equity Income Fund (Managed Fund) is focusing on generating income and achieving capital growth at the same time. The fund will invest in cash rich businesses, therefore there is an expectation that strong cash flows can be produced to support dividends in the future. Given the scenario, investors are already abuzz with the initial public offering that opened lately and the offer will close on Friday, 8th June 2018.
 
The offer reflects the fund dealing in Intelligent Investor Equity Income Portfolio, that has an estimated income of 5.3% pa and has returned 11.5% pa since inception in July 2015, compared to the benchmark, which returned 7.9%. The research track record is 20 years and the minimum amount is $2,500, which means minimum application size of 1000 units @ $2.50 per unit. The minimum amount required to list is $10 million. The main reason for listing this fund on ASX is that it offers an easy way for members to invest directly in the income portfolio. As a result of its ASX listing, the investor can buy or sell it like an ordinary share, with transparent unit pricing and easy administration and tax reporting. Moreover, the investors do not require to do paperwork and the investors can get money invested or redeemed in 2 days. However, the risk rating of the fund is high while the investment objective has reduced the risk of permanent capital loss with investing being established over the medium to long-term. This new fund is expected to list on 18th June 2018. The fund’s management fee per annum will be 0.97% inclusive of estimated net effect of GST and there will be no Performance Fee per annum.
 

Details of the Fund (Source: Company Reports)
 
Franking Credits:As per the IPO, InvestSMART is required to pay out to the investor any income plus franking in the respective financial year of earnings. The Fund is expected to pay two distributions each year, which will be in February for the December half year and in July for June half year. The company will advise franking details with each distribution and provide a tax statement at the conclusion of the Financial Year. InvestSMART expects that the distributions of income will be 80-100% franked. Moreover, the distribution is made up of all income received by the Fund and this includes dividends paid, interest earned on cash and realised capital gains.
 
Experienced Investment Committee:The investment committee that will manage the fund, consists of Paul Clitheroe Chairman, James Carlisle Portfolio Manager, Alastair Davidson Head of Funds Management and Gaurav Sodhi Portfolio Manager. Paul has 37 years of investment experience and is regarded one of Australia’s leading “money” experts. James has been researching stocks for more than two decades and is the author of ‘Value: Intelligent Investor’s Guide to Finding Hidden Gems on the Sharemarket’. Alastair has held executive positions in the banking and financial services industry for over 30 years in the UK, USA and Australia. Gaurav is a trained economist and has been an analyst at Intelligent Investor since 2009.
 
Trading levels for the InvestSMART Australian Equity Income Fund: The issuer, InvestSMART, expects the Fund to trade at NAV (Net Asset Value). For example, if the NAV of the fund is $2.60, the issuer expects to see the bid price at $2.595 and the offer price at $2.605 on the ASX. InvestSMART will make sure that the ASX prices will accurately reflect the NAV. It will also be published on the fund’s website as an “indicative” NAV throughout the trading day that will estimate the NAV every 15 seconds. However, the returns are not guaranteed and the fund value may go down depending upon the performance of the stocks that the fund managers invest in and the overall market conditions. This becomes a crucial aspect as investors are now wary of key income stocks including the banks that are under Royal Commission and earlier market darlings like Telstra that have reduced the dividend payouts.
 
Sector Diversification & Equity Allocation: The InvestSMART Australian Equity Income Fund (Managed Fund) will be investing in Financials, Consumer discretionary, Industrials, Consumer staple, Health Care, Real estate, Materials, Energy and Telecomm services sectors. The top ten holdings of the fund are Trade Me Group Limited (TME), which has the highest holdings of 7.08%, SEEK Limited (SEK) (4.94%), ASX Limited (ASX) (6.87%) Sydney Airport (SYD) (4.67%), Woolworths Group Limited (WOW) (5.59%), BHP Billiton Limited (BHP) (4.64%), Flight Centre Travel Group Limited (FLT) (5.16%), Wesfarmers Limited (WES) (4.62%), Commonwealth Bank of Australia (CBA) (4.97%) and Woodside Petroleum (WPL) (4.61%). Overall, INIF would hold up to 30 stocks, including some bank stocks, however, the fund’s exposure would be less than nine per cent compared to more than 22 per cent in the ASX200.

 
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