Summary: Closed End fund (CEF) advocates, LIC/LIT fund managers, the financial media, and even some research firms virtually always overstate ASX CEF performance. This is purely self-serving, as they all feed from the trough of active management fees and on the myth of active management outperformance.

Their tricks and deceptions include: focusing on portfolio performance not shareholder returns, often not including all expenses/leakages (in some cases no costs are included!), using Starting NTAs lowered by their own IPO selling commissions, not reflecting full dilution from capital raising and options (sometimes hypothetical option value is actually added!), adding deferred tax "assets" that actually reflect accumulated losses, including the performance of prior unlisted funds (only if beneficial), resetting inception dates (only if beneficial) by changing the fund strategy, adding undistributed franking credits, ignoring tax leakage, reporting "after-tax" figures that don't include all tax, and publishing returns that are intentionally unverifiable. Clear as mud? Well, that's the point!

The only true long-term measure of CEF performance for investors is Total Shareholder Return (TSR). And, using Sharesight, it is ridiculously easy to track and validate: you just choose your Start and End Dates and Sharesight does everything else: share prices, capital returns, distributions, franking credits. Even better, you can compare to any real alternative (typically passive) like VAS, VGS, VDHG, etc.

In this post, I will be progressively adding TSRs for ASX CEFs since their inception, and comparing with the performance claims made by fund managers, CEF advocates, media and research firms. Given the long-run underperformance is significant (often enormous!) it's clear discounts are not opportunities among virtually all ASX CEFs. CEF discounts are traps!

There are lots of tricks but few treats among LIC and LIT performance reporting


Most LIC/LIT fund managers focus on portfolio performance or, at best, NTA performance; claiming that this is what they are responsible for, not the CEF share price, which in 90% of cases is at a discount. But, as I explain on this site, the captive capital CEF structure leads to perverse incentives where fund managers and insiders extract gains at shareholder's expense. Seeing as they could all convert to Open End, the discounts are entirely the responsibility of fund managers.

In this post, I focus on the return to investors: Total Shareholder Return (TSR). In the long run, for investors, this is the only measure that matters. It also encapsulates all pros and cons of the Closed End fund. I refer to these as Discount Factors.

Discount Factors: Exit Liquidity, Performance (after all expenses), Total Expense Ratio, Blocking Stake, Shareholder Satisfaction, Boards/REs extent of representing shareholder's interests, Tax Leakage, Capital Raising Dilution, Unlisted Asset Proportion, etc.

Fund managers never mention these critical aspects. Self-serving CEF boosters like Affluence Funds Management (that benefit from trading against retail) claim large discounts are often overreactions and thus opportunities. On this site, I show why CEF discounts are justified and, in most cases, will only get bigger as the full picture of their pitfalls and underperformance is disseminated.

Note about undistributed franking credit reserves: LICs suffer significant tax leakage which can be returned via using the franking credits to frank dividends. However, not all LICs pay dividends and many don't distribute franking credits quickly. Franking credit reserves are also often not disclosed regularly or per share. Usually, at best, one can include them in calculations ending at 30 June if they've been disclosed in the annual report. Below I note if franking credit reserves have been added back (I typically do so where sizeable). If not noted, they haven't been added as their size makes little difference to the long-term TSRs (I check the approximate difference with estimates).

1. Platinum Capital Ltd (PMC)

Platinum Asset Management advertises a CAGR for PMC of 10.9% from 29 June 1994 to 31 Jan 2024:

But PMC raised money as a separate new fund in 2005 not 1994! The theoretical 10.9% return of the "strategy" is unverifiable. Indeed, I consider it a massive, deliberate overstatement given PMC has been around since 2005 - over 18 years to judge it on its own merits!

Daryl Wilson of Affluence Funds Management has been recommending PMC for years as one of the best ASX CEFs to invest in. In his Nov 2023 The Melbourne Cup Guide to LICs he reiterated the opportunity again:

31 Dec 2005 Price: $2.17. 14 Feb 2024 Price: $1.315. Discount: ~15%

PMC's actual TSR for investors since inception (over 18 years) is a miserable 2.92%. On an annualised basis, it has underperformed IOO by 4.28% per year! This is a cumulative underperformance over 18 years of over 230%.

Far from PMC's circa 15% discount being an opportunity these last few years, the discount simply continues to price the negligible pros and significant cons of the PMC captive capital CEF. Of the Discount Factors I listed above, I'd say the most significant are: Performance (after all expenses), Shareholder Satisfaction and the Boards' extent of representing shareholder's interests.

Is a huge discount any surprise given how many shareholders should want to escape? In my view, most CEF discounts (regardless of size: 10%, 20%, 30% even 40%) don't reflect the full downsides of their Discount Factors. For example, the vast majority of PMC shareholders know performance has been poor but have no idea exactly how badly it has underperformed the simple alternatives they could be invested in, or for how long. As I continue to reveal the incontrovertible numbers on this site, the full extent of the discounts that should apply to each factor become obvious, and word spreads to more investors and their financial advisors.

2. Tribeca Global Natural Resources (TGF)

TGF is the only pure commodities CEF on the ASX and there are no other diversified listed commodities funds on the ASX, despite them existing overseas. Consequently, its Tribeca managers (Ben Cleary) receive undue media attention despite horrendous performance.

Since listing in 2018, TGF has advertised target returns of 15-20% per annum. It finally dropped this slide from its investor presentations out of embarrassment!

The shameful truth is TGF has been one of the biggest disasters among ASX CEFs since it listed. TGF's TSR for investors since inception (over 5 years) is negative 7.46% per annum!! It has underperformed DBC (Invesco DB Commodity Index Tracking Fund) by 19% every year! This is a cumulative underperformance in just 5 years of over 240%! While destroying so much shareholder value, Tribeca extracted tens of millions in fees (including "performance" fees) and conducted an outrageously dilutive capital raising. See: > TGF - Tribeca Global Natural Resources - Cheat Sheet

30 Nov 2018 Price: $2.55. 22 Feb 2024 Price: $1.45. Discount: ~20%

Other alternatives to DBC delivered over this same period: BHP: 16.1% p.a, RIO: 19.6% p.a., Glencore: 12.48% p.a., Freeport: 29.18% p.a., Anglo American: 10.63% p.a., Teck: 16.51% p.a., VAS: 9.87% p.a., VGS: 13.36%, p.a. VDHG: 9.11% p.a. It takes a real knack to turn these commodity tailwinds into a negative 7.46% CAGR!

Still, Daryl Wilson (Affluence Funds Management) in his Nov 2023 The Melbourne Cup Guide to LICs picked TGF as one of the top 3 LICs/LITs for the next 12 months:

Affluence Funds Management never discloses its holdings when it publishes its Livewire recommendations but you can find them via its Monthly Reports. As of 31 Oct 2023, TGF was its second largest holding in the Affluence LIC Fund. It's Livewire article recommending TGF was published 6 Nov 2023, so it had already built its position when it published these LIC recommendations.

On 7 Dec 2024, Daryl Wilson was back on Livewire recommending TGF:

But as of 31 Jan 2024 (less than 2 months later), Affluence had sold down its TGF position such that it didn't appear in the Top 5 holdings:

Unsurprisingly, TGF was performing horribly while markets were booming. In just the last 3 months to 22 Feb 2024, TGF's TSR is negative 8.81% while VAS is up 8.41% and VGS up 10.3%! I'll say it again: discounts are not opportunities in CEFs for retail investors! (The opportunity is just to exploit naive retail investors looking for a free lunch. They don't understand, they are the free lunch!).

As always, Affluence Funds Management never advised when it was selling out of LICs or LITs it has recommended to Livewire's large retail audience. ASX CEFs are dominated by retail investors and there are no prizes for guessing it was mostly retail on the other side of Affluence's TGF sales (while its recent recommendation to thousands of retail investors was to buy TGF on a "three year basis"!). No doubt it will keep boasting how its LIC "investing" is outperforming, but it is actually a very active trader that wants a constant pool of naive retail investors filling in the ladder so it can get in and out (or improve its average prices).

At the time, I tried to warn retail investors in the comments on Daryl's article saying:

Obviously, the few sharpies making money trading LICs/LITs need them to persist (with all of their inefficiencies), and need naive punters in the market (e.g. buying what they already hold, but they'll receive no warning when the sharpie is selling!)

But my comments were censored by Livewire, and so I've used this blog to expose their business model that feeds off retail investors.

See: > Livewire's LIC/LIT coverage is proof that if you aren't paying for the product, you are the product!

Retail investors who eventually find and read this site are waking up to the dozens of pitfalls and scams in the Closed End Fund sector.


> Sharesight Blog: How Sharesight calculates your investment performance

> Firstlinks: Five famous investors with cheap listed funds

> Affluence Funds Management: Selecting LICs/LITs to suit your portfolio (YouTube)