A: That’s a great question. The reason LICs can trade at discounts and premiums is because a LIC is a listed company. As an investor I’m sure you’re aware over the short to medium term, share prices can be more driven by investor sentiment than actual company performance.

So if a portfolio manager of a LIC is performing well but has been getting bad press, it’s possible for the value of the portfolio to go up while share price goes down.

Similarly a portfolio manager may underperform, but if he/she is good at marketing themselves it’s possible for the share price to increase, despite lacklustre performance.

You are absolutely right when you say the only value the shareholder cares about is dividends and share price. But while the short/medium term share prices can be disconnected to the investment performance of a LIC, over the long term strong investment performance is typically linked with growth in share price.

We found this all a bit complicated, which is one of the reasons why we created the Switzer Dividend Growth Fund (SWTZ). SWTZ is an active ETF, which means we never have issues around share prices trading at premiums or discounts. The price you can purchase SWTZ will always be a very small spread around the net asset value of the fund.

Kind regards