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Why market conditions are attractive for LICs, May 2024 Fund Reports and things we found interesting

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Hi ,

The ASX200 Index rose 0.9% in May, and three of our Funds delivered positive returns, with only the Small Companies Fund bucking the trend. You can access all monthly fund reports below.

Given that the average discount of the Affluence LIC Fund portfolio hit a new record of 24% at the end of May, the theme for this month’s email is LICs. We wanted to take the time to provide you with some insights into what’s going on in the sector.

Below in our LIC updates section you can access

  • Our latest Guide to LICs, explaining how they work and what we look for when we invest in them.
  • A detailed look at why we believe the Affluence LIC Fund is an attractive investment right now.
  • The latest presentation for the Affluence LIC Fund.

If you have any questions about the Affluence LIC Fund or any of our funds, reply to this email or give us a call.

The cut-off for applications this month is 28 June for the Affluence LIC Fund and 25 June for all other Affluence funds. Go to our website and click “Invest Now” to apply online and access application and other forms. Applications received by the cut-off dates will be effective from 1 July. Processing might take a little longer than usual this month as we complete additional work required at the end of the financial year.

Thanks for reading and for your continued support. If you have any questions or feedback, reply to this email or give us a call.


Daryl, Greg and the Affluence Team.

LIC Updates

First up, we’ve updated and refreshed our Guide to Listed Investment Companies. Click below to download the Guide and learn more about how LICs work and what we look for when we invest in them.

Next, we’ve put together an article explaining in detail why market conditions are attractive for investing in LICs at the moment. It’s not just about discounts. We’re also seeing plenty of value in many of the underlying investment portfolios. And a number of LICs are under pressure from activist shareholders to perform. This type of setup is rare. In the past, when it has occurred, it has led to substantial outperformance vs the Australian share market over the next 1-2 years.

Finally, since a picture tells a thousand words, here’s our latest investor presentation for the Affluence LIC Fund.

Affluence Fund Reports

Affluence Income Trust

The Affluence Income Trust returned 0.6% in May. The Fund pays monthly distributions. The current distribution rate is 7.5% per annum.

The cut-off for monthly applications and withdrawals is Tuesday 25 June.

May 2024 Fund Report

Affluence Investment Fund

The Affluence Investment Fund returned 0.6% in May. Since commencing, the Fund has returned 7.8% per annum, including monthly distributions of 6.4% per annum.

The cut-off for monthly applications and withdrawals is Tuesday 25 June.

May 2024 Fund Report

Affluence LIC Fund

The Affluence LIC Fund returned 0.9% in May. The average NTA discount for the LIC portfolio hit a new high of 24% at the end of the month.

The cut-off for monthly applications and withdrawals is Friday 28 June.

May 2024 Fund Report

Affluence Small Company Fund

The Affluence Small Company Fund returned -0.3% in May. Midway (MWY) and the US Masters Residential Fund (URF) were the largest positive contributors.

The cut-off for monthly applications and withdrawals is Tuesday 25 June.

May 2024 Fund Report

Investment Profile

Each month we profile an underlying investment of one of our funds. This month, we’ve taken a look at one of the holdings in the Affluence LIC Fund. Salter Brothers Emerging Companies Ltd (ASX: SB2) is a listed investment company. As the name suggests, SB2 invests in emerging companies, meaning Australian listed and unlisted securities values at under $500 million at the time of the initial investment. Click below to find out why we like this LIC right now.

Top performing funds over 5 years

Glenn Freeman at Livewire Markets has named the Affluence LIC Fund one of the top five returning Australian equity funds over the last five years. Our unique discount capture strategy has added significant value to the underlying returns from LICs.

To level the playing field, the screen Glenn chose excluded funds that employed gearing. Also, no more than one fund was allowed for each manager. Otherwise, our Affluence Small Company Fund might also have made the list, with an almost identical return over 5 years.

Things we found interesting

Financial word of the month.

Volatility: The extent to which an investment’s short-term returns differ from its long-term average returns, technically known as standard deviation and colloquially known as Oh my God!

When an investment has been making money, the people who own it say that they are comfortable with volatility. When it starts losing money, they suddenly will declare that they hate volatility. The investment hasn’t changed; only their perceptions have. The most volatile element in financial markets is investors’ own views of volatility.

Source: “The Devil’s Financial Dictionary” by Jason Zweig.

The month in financial history.

The Bank of England is one of the world’s oldest financial centres, having overseen the English economy since 1734. Among its many roles, the bank stores the UK’s entire reserve of gold bullion. It has never been robbed, but according to the bank’s own website, it once came close.

In June 1836, the bank’s directors received an anonymous letter in which the author claimed to have direct access to the huge stash of gold in the underground vault. The directors assumed this was a joke and ignored it. Sometime later, they received another letter. This time, the author offered to prove it by meeting them inside the main gold vault at a time of their choosing.

The directors considered it impossible for someone to break into the vault without their knowledge. Nevertheless, they agreed to the meeting and gathered together one evening inside the vault at the agreed time. To their great surprise, a noise was heard beneath the floorboards, and a man popped up underneath their feet.

It turns out he was a sewer worker who had been completing underground repairs close to the bank. While working, he discovered an old drain that led directly underneath the gold vault.

The worker declared he had not taken anything from the vault despite having multiple opportunities to do so. After confirming the inventory was still in place, and as a reward for his honesty, the directors gifted the worker £800. That’s about $150,000 Australian dollars in today’s money.

Vaguely interesting facts (about gold).

  • Most gold used in jewellery is alloyed with silver, copper, and a little zinc to produce various shades of yellow gold or with nickel, copper, and zinc to produce white gold.
  • Despite what the diamond industry wants you to believe, gold is the 75th scarcest element in Earth’s crust, which makes it significantly rarer than diamonds.
  • According to science, nearly all the world’s gold came from meteorites that bombarded the planet over 200 million years after it formed.
  • The coffin found in Tutankhamun’s tomb contained 1.5 tonnes of gold, which, at today’s prices, would be worth around $146 million.
  • Australia has the largest gold mine reserves in the world, estimated at 10,000 tonnes.
  • There is a guesstimated (mostly unextractable) 20 million tonnes of gold in the Sea.
  • It is calculated that 130,000 tonnes of Gold have been mined throughout history.
  • Pure gold is 24 carats. Most mined gold is 18-22 carats, with some impurities.
  • Your hair and bones contain traces of gold and it is safe to eat.

Sources: mentalfloss, wikipedia.

* You can’t just eat any old gold. It may contain other metals, which can be toxic and dangerous if consumed. So don’t eat your wedding ring! Edible gold leaf must be at least 90% pure gold, with the other 10% typically consisting of another safe metal, like pure silver. Gold is considered biologically inert. As a result, it will pass straight through the digestive system without being absorbed into the human body. Quotes of the month.

Quotes of the month.

“I have an answering machine in my car. It says, “I’m home, but leave a message, and I’ll call when I’m out.”

“The hardness of the butter is proportional to the softness of the bread.”

“Experience is something you don’t get until just after you need it.”

“Borrow money from pessimists — they don’t expect it back.”

“A conclusion is the place where you got tired of thinking.”

More quotes that have been attributed to Comedian Steven Wright. But in many cases, the original author was likely someone else.

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Got a question?

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If you want to catch up on earlier versions of our monthly newsletter, you can view them here .

If you have a question, you can email or call using the details below, or simply reply to this email and we will be in touch with you as soon as we can.

This information has been prepared by Affluence Funds Management Limited ABN 68 604 406 297 AFS licence no. 475940 (Affluence) as general information only. It does not purport to be complete, and it does not take into account your investment objectives, financial situation or needs. Prospective investors should consider those matters and read the Product Disclosure Statement (PDS) or Information Memorandum (IM) offering units in the relevant Affluence Fund before making an investment decision. The PDS or IM for each Affluence Fund contains important notices and disclaimers and important information about each offer.

As with all investments, an investment in any Affluence Fund is subject to risks. If these risks eventuate, they may result in a reduction in the value of your investment and/or a reduction or cessation of distributions. Distributions are not guaranteed, nor is the return of your capital. Past performance is not indicative of future performance. It is important that you know that the value of your investment will go up and down over time, returns from each Fund will vary over time, future returns may differ from past returns, and returns are not guaranteed. All of this means that you could lose money on an investment in an Affluence Fund. As set out in the PDS or IM for each Affluence Fund, key risks include concentration risk, economic and market risk, legal and regulatory risk, manager and key person risk, liquidity risk, leverage risk and currency risk. Affluence aims, where possible, to actively manage risks. However, some risks are outside our control.

This information and the information in the PDS or IM are not recommendations by Affluence or any of its officers, employees, agents or advisers. Potential investors are encouraged to obtain independent expert advice before making any investment decision.

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Affluence Funds Management
Level 22, 127 Creek St,
Brisbane, Queensland 4000

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