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Pengana Capital chief executive Russel Pillemer says a share register weighted towards financial planners is the reason the firm's listed private equity trust is trading at a premium to its asset value, defying the broader trend of recent listed fund offerings.
The fund manager is expected to announce plans for a follow-on offer of units in its $205 million Private Equity Trust, which has gained 18 per cent since listing in May and now trades at a 7 per cent premium to its net asset value.
As new listed investment company (LIC) and listed investment trust (LIT) offerings have traded at discounts to the value of their assets, there have been suggestions financial advisers are placing clients in the offers to earn stamping fees, before selling, and buying into a new offer.
But Mr Pillemer says the experience with the Pengana Trust has been the opposite.
"To a large degree [our register] is dominated by financial advisers and they do not sell. They are holding for the long term, for portfolio construction purposes," he told The Australian Financial Review.
"It's hard for them to make changes to their portfolios. The regulation and compliance means that it is difficult to do, so the last thing they want to do is churn their books.
"But there has been a lot of public criticism that they are doing the wrong by their clients, and they are allocating to LICs and LITs for the stamping fees."
The booming listed fund market and the role of brokers and advisers, that are paid commissions by the funds raising the money, has been a source of controversy and led to calls to review into the conflicted remuneration.
The widening discounts of these funds relative to their asset values has added to criticisms of these structures, in which investors do not redeem their investment but must find a buyer on the exchange.
But an initial wave of equity and hedge fund listed offerings has eased as most of the securities trade below the value of the assets in the fund.
Among the 26 ASX listed global funds tracked by broker Bell Potter, all aside from the Pengana Private Equity trust trade at a discount. Only six funds trade at a discount below 5 per cent. The average discount of the 26 listed global funds is 9 per cent.
The Pengana International Equities fund, which was previously managed by Hunter Hall, trades at a 12.6 per cent discount to its net asset value.
The persistent discounts has prompted responses from the managers but has also attracted shareholder activists that are agitating for capital to be returned to investors.
In response to criticism about the structure of LIC offerings, several managers have designed offerings to be more "shareholder friendly".
In 2017, VGI Partners said it would pay broker fees while Magellan offered investors loyalty units for participating in an offer. Pengana's Private Equity Trust offered investors alignment shares in the management company.
However, interest in LICs and LITs has migrated to other asset classes. At present, the search for yield is being met by a wave of corporate debt funds selling or planning to sell listed funds.
Mr Pillemer says the Pengana private equity raising was in response to interest for smaller investors and advisers to gain access to what is predominantly an institutional asset class.