Thank you all for joining us today for the WAM Strategic Value Results and Questions and Answers webinar. As you all know, this is your company, and we love investing for you on your behalf. Please, thank you everyone who sent in the various questions. If you have any questions during the webinar, please send them in. If you have any questions after the webinar, please feel free to email them to us, and we'll make sure we answer them for you. This is looking at the period we've just had. I mean, it was from, I suppose, from an investor's perspective, it was a reasonable period in terms of performance. One of the positives was the ability for the company to increase the dividends. You'll see that we increased the dividend by 33-odd %.
It is now yielding on an after-tax base a little over 5%, and on a before-tax basis, a little over 7%. Also, the pleasing thing is over the last three or four years, we have been able to build up the profit reserve from the early days where we had very little in the profit reserve. Now we have a little over $ 0.18 or $ 0.182 in the profit reserve. Paying the dividend at the rate we have just paid it, we will be able to continue to pay it at that rate for the next three years at least. Obviously, the plan from the board's perspective is to gently increase that dividend and to provide that plus capital growth to shareholders.
In terms of where the share price is versus the NTA, that is disappointing from an investor's perspective, myself being a large investor, and I'm sure everyone else there. We believe that we will get WAM Strategic Value trading at NTA, if not a premium. Also, one of our shareholders a number of years ago asked if they could have the look-through NTA, and that's the NTA of all the companies we've invested in, what the value of their assets are. That's a lot higher, that's around that high $ 1.40 level. What I'm going to do today is myself and Martyn McCathie are here, and we're here to answer any questions you have. Also, all the questions you've sent in, we've got April from our investor relations team there who will be asking specifically the questions.
We are very happy to go into each individual stock, et cetera, et cetera. If you look at, I know there are a few questions that have come in, and we will touch on them specifically. One question was, "Hey, look, I put money in the IPO and I am disappointed. I put money in the IPO myself and I am disappointed. Why am I disappointed?" One is the share price is trading at a discount to NTA. I know we have had a good, well, over the last few years, a good fully franked dividend. This year, obviously, a solid fully franked dividend, which is well and significantly higher than what the market is delivering. In terms of returns, even if the share price was trading at NTA, the returns have not been spectacular. They have been reasonable in terms of the underlying performance of the portfolio.
Broadly, the portfolio has performed in line, excluding expenses, costs, et cetera. The portfolio has performed in line with the market, which isn't good enough. Now, one of the things is worthwhile noting is the volatility of the portfolio. Because we're buying discounted assets, then the volatility of the portfolio has been a lot less than the market. I think the market volatility was well over 11%. And the volatility of the actual underlying portfolio is just a little over 8%. In theory, volatility is a measure of risk. You're taking less risk and you're getting the same return as the market. As an investor, I'm happy to take less risk, and I'd prefer to get a better return than the market, or even take a little bit more risk and still get a better return than the market.
In terms of what we've been doing, buying those discount asset plays, that'll continue to happen. One of our goals for this next 12 months is to get the share price trading at NTA, if not a premium. We think we'll get that from performance and also the ability to keep growing our dividend. In terms of performance so far this year, and particularly in the last few weeks or since the end of February, the market's off a little bit. We've just been a little bit, the portfolio's held up better than the market since in this last little period where the market's been a bit soft. Why don't I leave it there and pass over to April, who'll take us through the questions. Martyn and myself are obviously available to answer them.
Thanks, Geoff. Some of you sent in questions beforehand that we'll go through. As Geoff said, please ask any questions that you'd like through the Q&A chat function. Before I begin, please make sure that you read the disclaimer on the screen. The first question is for Martyn, and it's from Greg. Can you please touch on some of the top portfolio contributors such as QVE and Salter Brothers?
Yeah, of course. Thanks, April. Look, on both of those, maybe start with QV Equities. It's an investment that has the thesis has played out for us. We were accumulating QV Equities at about a 10% discount to NAV on average. Through that investment, we got market performance plus the closing of that discount as QV Equities went into a scheme of arrangement with WAM Leaders. At the point of the scheme of arrangement, there was a cash-out option and also a scrip option. We took the cash-out option there. Took the cash-out and have redeployed that into new opportunities. One of those opportunities that you mentioned in the question was obviously Salter Brothers SB2. It's a position where we have been able to accumulate stock at a 25%-30 % discount to NTA.
The NTA performance has been strong over the last 12 months with their investment portfolio, and we've seen a small narrowing of that discount as well. Look, I think to give credit to the team at SB2 at Salter Brothers, they're doing a lot of work to change their shareholder register. The register was historically, and the product was designed for sophisticated investor visas. So a lot of initially offshore investors. They are looking to over time change that register composition with marketing. More recently, they have announced an inaugural dividend for the company, which I think will be well received by the market. One of the catalysts that we see for that discount narrowing further. It is one that we've been opportunistic with and will continue to pick up stock as that discount blows out.
Thanks, Martyn. The next question comes from David, who's asked, "Given the ever-deepening breakdown of governance in the U.S., what are your thoughts on the effects on WAM managed shares?
That's a big question. In terms of what we're seeing at the moment, from a market perspective, the equity market in the U.S. had performed extremely well. The various policies and strategies that Trump had really foreshadowed before he won presidency, and even after he won presidency, people are aware of that. The sort of the concern, the part that's probably shaken the market a little bit more is the fact that he had some policies that would be negative for the economy that he was going to implement, and he had some policies that would be positive for the economy that he was going to implement.
What he's done to date, and I know it's only been a little under two months, has tended to be the negative policies, the ones in terms of increasing tariffs, which is inflationary, reducing costs in the public service, which obviously is negative for the economy, people lose jobs. Some of the more positive ones in terms of for the economy is cutting tax rates on the corporates, which he's again promised, but there's been no real discussion or sign of that. I think some of the excesses have been taken out of the market. In terms of our abilities, what we're looking for for WAM is to buy assets at a discount. If this shakeout puts any additional pressure on some of those companies that are trading at discounts, they get a bigger discount. This sometimes happens.
What you tend to find is in the early part of when the market, there's a bit of a market shakeout, you'll find that the discounts to NTA actually narrow because, well, actually the share price holds up. If it is a discount, the share price holds up a little bit more than you expect. So we're well positioned there. What we do in WAM is very systematic. Obviously, in terms of the impact that the market has on what we do, obviously it does have an impact because we're buying undervalued assets. And if those undervalued assets decline in value because the equity market falls, then that'll have a negative impact on WAM. This current shakeout, we don't expect that the big risk in the U.S. is it turns into a recession. The market's forecasting a recession.
What we think is now that's not the case at this point in time. What the market's doing is just forecast, is just saying, "Look, it was a bit overextended on the upside." It is just, I don't like the words, but people use sort of healthy profit taking. Obviously, when everyone's losing money, it doesn't feel healthy at all. Taking some of the excesses out of the market is good for the markets long term.
Thanks, Geoff. The next question, we've actually got a few on corporate activity. This one comes from Joe, who's asked, "Are there any updates regarding VGI Partners, VG1, or Regal Asian Investments, RG8? Both these Regal LICs have been trading sideways to down recently. SABR has recently sold down VG1 and is no longer a substantial holder. Will WAM become more active in VG1 to push for the discount to close?
Yeah, both VG1 and RG8, I think one's at about an 8% discount, the other about a 12% discount. I mean, we have been trading the discounts. We, like SABR with VG1, selling a few shares because the discount had narrowed significantly. You must cast your mind back a year or two ago, they were trading at 18%-20% discounts. The discounts have come in. Both the VG1 and the RG8, they have capital management programs. We think what they need to do is not only have those capital management programs, but also they have to have a really good shareholder engagement and comms program. We've got eight listed investment companies, five of them traded either NTA or premiums and three of them at discounts. Of the discounts, WAM is one of them.
It tends to be the most recent three are the ones trading at discounts. That gives you a little bit of a hint of what needs to be done is the shareholder bases have to be aligned with what the individual company's trying to do and that everyone who's a shareholder understands what the company's trying to do. You do not have the selling pressure. You need to get more buyers. Now, with WAM, we were trading at a bigger discount. The discount has come in. It actually had come in quite a bit, I think at the end of the last half. It's actually drifted out a little bit more.
We have to do some more work in terms of telling the story and so people understand that you're buying with WAM, I think at the moment you're buying a dollar of assets and you're paying $ 0.88 or something like that. In terms of being more active from our perspective, in terms of we communicate with Regal. They know what's required to do, needs to be done, and they are doing it. Whether they achieve it trading at NTA or a premium, they've been able to do that with their other listed investment company. To me, we think they can do it with this. I suppose what I've learned in investing, patience is very important. I think what has happened to WAM is a lot of the investors that have invested in WAM do not realize that our strategies take time to play out.
There's no use for us being an activist for RG8 or VG1. I mean, we would have to use how do you become an activist? We communicate with the company. We could use one of our vehicles to bid if it made sense. It has got to make sense. We have got to be able to continue to pay fully franked dividends and growing ones in the vehicles we use. There are a number of factors. SABR has not sold out totally. They are just not a substantial shareholder anymore. They have gone under the 5%. They have probably got 4.5%.
Thanks, Geoff. Joe also has some follow-up questions in relation to this. Will WAM push for corporate activity to either combine the two LICs, VG1 and RG8, to increase liquidity and reduce admin costs? Or there's another one without asking a minute, but maybe we'll start with that.
That's an option they've got. The interesting thing is they've also got the PM Capital LIC, and that's actually made a bid for the Platinum LICs. There was a scenario where maybe RG8 could have been merged with the PM Capital LIC, which is trading at a premium, or VG1 could have merged with them. As you said, the two could be merged together. To me, I don't necessarily think merging the two together, if they're both trading around that 8-12% discount, whether that will help significantly. Obviously, merging with something trading at NTA, if not a premium, allows everyone to have an arbitrage opportunity. That's more interesting from our perspective.
You've already answered Joe's follow-up question, which is on PM Capital. The next question comes from David, which is on the share price. We have a few on the share price. David's asked, "With WAM not matching the ASX 300, what do the directors intend to do? There seems to be little pressure put on any of the funds to return to net tangible assets.
You might think there's little pressure put on, but we look at them on a daily basis consistently. I mean, we've been able to grow our business by making sure our listed investment companies reflect their true value over time. As I mentioned, of our eight listed investment companies, five of them are trading at NTA, if not premiums. The three more recent ones are trading at discounts. The good thing is we understand why they're at discounts, because it takes time to tighten up the share register. Once you get that share register tight, then you don't need much buying for the share price to fully reflect the NTA. If you look at WAM as an example, say the NTAs, the last month's, the end of February, stated NTA was $ 1.29. We said the look-through NTA was $ 1.49.
You'd assume that over time the NTA should trade between $ 1.29 and $ 1.49 because the $ 1.49 is actually, if all the companies we've invested in were trading at NTA, then that's the value you'd get. Yeah, I mean, it's a constant concern for us. We're constantly aware about it. We have 13-14 people in shareholder engagement and comms. If you have any ideas or thoughts, please come through with them. We're confident that the three LICs that we manage that are trading at discounts will trade at NTA, if not premiums. The problem is I can't tell you exactly when. If we don't get to WAM Global, April, can you ask me about WAM Global a little later about premium and discounts? That's like a point in case. Thanks.
Will do. Thanks, Geoff. The next question comes from Derek, and it's also on the share price. He's wondering, is part of the problem WAM's practice of amortizing dividends instead of distributing profits when they're earned? Perhaps, as other LICs have done, WAM could be converted into an open-ended fund.
Okay, two parts of the question there. I'll do the second part first. We could turn it into an open-ended fund. I mean, what that would do for the people that, well, we could turn it, if we turned it into an open-ended fund, then it would be more of a trust structure. That changes the whole tax dynamics for the investor base. That could be the case. People would have an opportunity then to get out, or if they wanted to sell, they could redeem at NTA. For all those people that didn't want to sell, it would change their tax base, but also it would take away from them the ability to sell at a premium. As I mentioned, effectively of our eight LICs, one is trading around NTA and four of them are trading at premiums.
The premiums, I think the highest premium, April, what's the highest premium at the moment? Is it about a 9% premium for one of them, I think?
I think global is about that now.
No, discount. Global's a discount, but no, one of them, I think in micro is trading at about 8% or 9% premium. Those premiums can go to, we've seen them, I think the most extreme premium was WAM Research, which got to a 50-something % premium at NTA. To me, it's sort of like two sides of the coin. If you turn it into a trust structure and allow it trades at NTA, then you'll never get the benefit of something trading at a premium. We've shown over time that our listed investment companies do trade at premiums. When do they trade at premiums? It's when the share register has tightened up and people are prepared to pay above what the value of the assets are worth.
To me, WAM's a pretty simple story in terms of, as I mentioned, $ 1.29 of real assets, look-through value of $ 1.49 at the end of last month. Where should they be trading? Maybe in between the two. I would not want to leave before that happens. If we turned it into a trust, the best case you would get is $ 1.29. You would actually lose some franking credits because of what the government brought in in terms of tax changes about a year ago. The first part of the question, what was that? I have answered the second part. What was the first part?
The first part was, sorry, one moment. Sorry. Sorry, I've just lost it. We also have a question from Gary, actually, which is in relation to WAM Global, which you alluded to, Geoff. Gary's asked, "How many shares does WAM Strategic Value own in WAM Global? And what price will WAM Strategic Value exit that company?
Do we have the first part of that last question? If you can look that up while I answer this. Hey, Martyn, how many shares is it exactly? Can you look that up?
Yep, of course.
We will give you the exact number of shares. The more interesting question is when we sell them. I think I was talking about WAM Global a bit earlier. WAM Global is one of the three LICs that we have and is currently trading at a discount to NTA. It is the larger of the three. We have been working on shareholder engagement, communications, strategies. Go back a year and a bit ago, it was trading at about a, I think, 15%-18% discount. We had a detailed shareholder engagement communication strategy six months ago. That discount came in again. We had another shareholder engagement communication strategy more recently. That discount came in to about a, I think it was trading at about a 5.5% discount at some point in time.
Because what you've got to remember is listed investment companies, it's a simple first-year economics when they teach you about supply and demand. NTA is equilibrium. If you have more supply and less demand, then you trade below equilibrium or NTA. If you have more demand and less supply, then you move back up to NTA. If you have still more demand and less supply, then you trade at a premium to NTA. It's really, that's what we spend a lot of time on from our perspective and making investors understand what they've invested in. All investors that are on the call or shareholders, if you're not interested in a company, that's what our mandate is, buying assets at a discount. We're trying to get the exposure to those assets and the uplift of the discount.
I think a few people have been concerned that we have not done more in terms of the activism side of things. It takes time for all those things to play out. I think we have been involved in four or five or even six corporate takeovers or corporate actions, which is probably more than most other participants. As Martyn talked about, say we have been buying shares in Salter Brothers at like a 30% discount, a 28% discount NTA. We have gone from owning none to, Martyn, are we up to 11% or 12%?
11%, yeah.
Yeah. It just takes time. It just takes time to build a position. You want to build a position at the price you want to buy things at. You need to have patience. If you're not looking for that, we're giving you the exposure of the underlying assets, and we're giving it to you cheaply. We believe that the ones that we invest in will eventually trade at the value of the assets, so we'll be able to sell. Back on WAM Global, we've been able to get that to more recently. It did come into less than a 6% discount. The discount's drifted a little bit now with a bit of volatility in the market. To answer your question, when are we going to sell it? First of all, we made a mistake with the takeover.
Sorry, when WAM Global bid for Templins, we took shares because we were 6% better off. In hindsight, not because we should have taken the cash because then A, it would have freed up the cash. B, we would not have had to keep talking about each result. C, we do not get a management fee on that part of the portfolio. For all those reasons. It would have given us cash to do various other things potentially. Our plan would be, our plan is to sell down. We will decide when it is the right time. Obviously, if it was trading at NTA, if not a premium, we would be on the selling side. If we can find other investment opportunities at a bigger discount, then maybe we sell some at a discount if we do not think in the short term it is going to trade at NTA.
Even excluding, don't think in the short term it's going to trade at NTA. If we can find something that's trading at a bigger discount, then we're switching a smaller discount for a bigger discount, which is better for shareholders. These are all our options. I think.
Thanks, Geoff. The last part of Gary's question was.
Yeah. April, I think I've lost you.
Issues. Yeah, circling back to Derek's question, the first part of it was whether part of the problem of WAM's share price might be the practice of amortizing dividends instead of distributing profits when they're earned.
Oh, yeah, just on that, with our profit reserve, that is the change in the value, the realized and unrealized change in the value of the assets. So a lot of that profit reserve is not realized. In terms of our ability to pay dividends, history shows that investors prefer a consistent growing stream of fully franked dividends, not like a high dividend, then a low dividend, and then a high dividend, then a low dividend. That strategy does not really work with listed investment companies. It might work with trusts where you actually distribute 100% of what they have realized. With companies, that is the beautiful thing about the listed investment company, they do not have to do that.
Thanks, Geoff. We have a question from Samuel. He has asked, "Platinum Capital, PMC, and Platinum Asia, PAI, are subject to takeover offers from another LIC. Are you able to rule out accepting the scrip offers for them so as to avoid getting into the same mess that happened when Templeton was taken over?
Yeah, to me, that's not necessarily the same case, Samuel. I mean, we'll look at each on its own merits. When WAM Capital made a bid for West Oz and OzGrowth, we actually accepted script because it wasn't a cash alternative. Then we sold the WAM Capital script. It'll take a number of factors into consideration, either price and the liquidity of the underlying business that we're investing in. The PM Capital, the liquidity of that company. If you had to ask us now, we'd probably be more inclined for the cash. When we get there, we'll make a logical consideration, accepting that sometimes people take cash and then they sell the shares afterwards. Trying to work out the impact we think that'll have on the underlying value of the bidding company, assuming the bids go ahead.
Thanks, Geoff. We've got a question from Roger. "NAOS Small Cap Opportunities Company was once a LIC that you liked. What are your thoughts now?
Yeah, incredibly disappointing performance. Yeah, I mean, we like the discount. Unfortunately, the underlying manager has performed poorly. It's a very small percentage of our portfolio. I'm just trying to think. Yeah, it's about less than 1.5% of the portfolio. Yeah, it's really disappointing. Really disappointing. Not that excited about it.
Thanks, Geoff. We've got a question from Steve. This might be more for WAM Leaders and WAM Capital, but do you have a view on A2 Milk?
Yeah, it's more the leaders and capital. The guys, April will come back to you, Steve, and tell you the guys' view on A2 Milk.
Yeah, I'll reach out, Steve. Thank you. We've got a question from Rodney. "Geoff, which stock in the portfolio is most misunderstood by the market that you are most excited about?
Oh, Rodney, good question. I would not want to tell you because that is the one we are buying. That is the problem. I do not want everyone to buy it because then the opportunity evaporates. Yeah, sorry about that, Rodney. In six months' time, ask that question again and say, "Six months ago, I asked you, which was that stock?" and I will tell you. The tough thing is the liquidity in some of these companies. It does take time to build positions. You have to be patient if you want to build a position at the right price. Yeah.
Thanks, Geoff. Another follow-up from Rodney, which you have touched on a little bit before. Why should you stay in a closed-end fund?
I actually think closed-end funds, one of the holy grails of closed-end funds is the fact that they can trade at discounts to NTA and they can trade at premiums. To me, it's nearly unbelievable that you can get exposure to all these underlying fund managers, effectively $ 1.49 of assets, and you're paying $ 1.10, sorry, $ 1.12, $ 1.13, $ 1.14. Obviously, you've got to assess whether you believe that one day those assets will be fully reflected of the market value. We've got enormous confidence that'll be the case. To me, the listed investment company or the closed-end pool of capital is a great pool of capital. A, for a fund manager, because they can take a long-term view and they don't get caught with money coming in and money coming out.
If you had an open-ended fund at the moment, I was looking at the numbers of the money that's flown out of the open-ended funds in the U.S. There's trillions of dollars. Maybe it's not trillions. I know the market's lost $4.5 trillion, but maybe it's billions of dollars that have come out of the market since its peak a number of weeks ago. If we had an open-ended fund and then you have redemptions, then you're forced selling. You're selling companies that you think are cheap. As an investor, to me, that's a very frustrating behavior as an investor because you want to be buying companies that are cheap, not selling them.
Thanks, Geoff. We've got a question from James. "How do unlisted assets impact your investment approach?
Yeah, unlisted assets, not really much at all. Only occasionally, some of the underlying funds or underlying companies we invest in will invest in unlisted assets. We make an assessment of the value of those unlisted assets when we're trying to work out what we believe the value of the assets of the underlying company is. We usually put a, if they're unlisted, we usually, because if we don't know the assets well, then we'll put a little bit of a discount from our perspective. On the other side, you could know the assets well and they might be worth more than what they're in the books at. Usually, that's not the case, but occasionally it can be.
Thanks, Geoff. We have a question from Paul. "Can you please update us on the government's plan to impose a 30% tax on superannuation balances over $ 3 million?
Update you. Okay. It looks like we're having an election in May sometime. The current government was looking at increasing the tax from 15% 30% on balances over $ 3 million. We didn't have a strong view on that. One thing that both governments need to do is they need to fix the tax system. To me, it's not an equitable system, particularly for younger Australians. Work has to be done on that. What we were concerned about is the fact that the government wanted to allow the taxing of unrealized gains. They only came out with that because their initial policy was to not tax; it was only a tax on realized gains for super.
Because the big industry and union funds could not work out what that was on a per-client basis, they said they can only work it out on an unrealized gains basis. Therefore, the government said, "Oh, look, we will tax unrealized gains." It is just bad policy. You have people that have relied on this system, the superannuation system, to buy assets. All of a sudden, they might be unlisted assets and they are going to be taxed on the change in the value, which they have no liquidity in. Some farmers will be caught with it. One of our shareholders is a farmer outside a rural city. He nearly went under during the GFC. His banks wanted the money back. He sold half his farm, put the other half of his farm in his super fund because he did not want to ever be in that position again.
He's quite elderly. Now that if this comes in, the tax on unrealized gains, he'll have to sell the other half of his farm just to pay the tax because the gain hasn't been realized. It's just bad policy. People are concerned that it might end up becoming they might bring in tax on unrealized gains in other areas, which just discourages people investing. What we want is a tax system that's fair, that treats younger people fairly, and encourages younger people to work and get ahead. We all know it's a pretty tough environment out there, particularly in the housing market, where we've had housing inflation for the last 25 years running double the rate of normal inflation. Every year, your chance of buying a house, unfortunately, goes against you. Anyway, I'm off topic there.
No, it's a big topic. I've got two questions for Martyn. Rodney's asked, "What is the cash limit of the fund once proceeds from Australian Unity Office Fund and Global Data Centre come in? Do you need to deploy that capital back into markets, or can you be patient?
Thanks, April and Rodney. Look, we can be patient, sorry. We have got no limits in the fund. We have got a very flexible mandate. On the cash, we have in the past held high levels of cash. I think financial year to date, we have averaged around about 17% cash. Obviously, at the end of February, it was a little bit lower. Through the month of March, you will see it has dialed up. Live, we are sitting around 11% cash. Obviously, GDC is about 4% of the portfolio. AOF is 5%. When those two come back through, we would be sitting on a healthy cash balance. Those two are effectively cash boxes as we stand today, with the proceeds from GDC coming in and AOF, hopefully by the end of this financial year, largely paid back to us.
It gives us a little bit of protection in the portfolio and a bit of a buffer from the volatility we're seeing at the moment, given they are quasi-cash positions already.
Thanks, Martyn. The next question comes from Rob. "What is the logic to invest and hold in Lark Distilling as it's not a listed investment company?
Yeah. That one was one that sits in the discount asset sleeve of our portfolio. The thesis there was that Lark was trading at a discount to its whiskey under maturation and that there would be a way for the company to unlock that value. Obviously, the share price has not performed as we would have hoped it to, and the company is still trading at a discount to its asset backing, being that property with the whiskey barrels under maturity. That is a small position of the portfolio that we continue to hold. There was a change 12-18 months ago with the management team there. They have signed a number of strategic partnerships into the Asian market to look to turn over that whiskey bank and increase cash flow and generate returns for investors.
Expect that one to be cash flow positive in the next 18-24 months. I hope that's reflected in the share price. We're not thinking about it as an asset play as we are at the moment and more a company that's more trading like an operating business would. Still believe that there's value from that transaction for investors.
Thanks, Martyn. The next question comes from Brian and is for Geoff. "Which industry sectors are likely to be the growth areas for the year ahead?
Hi, Brian. It's a good question. Yeah, I think it'll be a tough year ahead. The market had performed pretty strongly. We've got the adjustment in the U.S., obviously the adjustment globally with what Trump's various plans are. There's no doubt, I'm not sure whether you've read or how old you are, but back when the Berlin Wall came down, there was a big growth dividend globally because people had to spend less money on protecting themselves. Now that it's actually nearly the reverse of the growth dividend. The uncertainty that Trump's creating globally, and particularly with Europe, just increases the cost of all those countries, cost in terms of spending for defense. That's got to come from somewhere. It comes from high taxes, which is negative for the economy. I think it's going to be a challenging year.
That's my view. In terms of any individual sector, I'd probably defer to whether it's Matt or Oscar or Katrina, the lead PMs for the various other companies. They'll have all their strategies, obviously technology. Even though that's been overhyped, there's still significant wealth that's going to be created through the utilization of smart technologies, etc. The good thing is on WAM, we don't have to worry about that that much. We just need to find a company that's trading at a discounted asset and then understand how it'll trade at NTA again. If we believe it will, and we can see a catalyst can do that, then we buy it.
Thanks, Geoff. While we're on that topic, Rodney's asked, "The S&P 500 is down 10% from its peak and the NASDAQ is down 14%. Are we in a broader bear market and how do you position to come out the other side?
We're not in a bear market yet because obviously the market's got to fall 20%, so then we'll enter a bear market. I mean, what we do know is markets go up and down. You don't want to get too concerned about a market falling because the challenge is how quickly you make the money back. In terms of how we're positioned, I know we mentioned earlier on the call is we're holding a bit of cash already, about a little under 12% cash. Also, when AOF turns into cash and Global Data Centre, when we get the rest of our money for that, that gives us quite a bit of flexibility in terms of our cash levels would be at a reasonable level.
Broadly, what you want to do is broadly what I've discovered over time is when I was a lot younger, I sort of focused on market timing a lot more. As I've seen more market cycles and probably the inability to pick the tops and bottoms of markets, I realized it's really timing the market rather than timing of the market. A nice statistic is over the last 20 years, I think if you missed the best performing day each year, that's 20 days over 20 years, but the best performing day, your return as an investor in the market would be close to zero. If you were in the market and got all those, the best performing 20 days over that 20 years, then your performance is close to 8% to 10%.
Yeah, to me, I mean, we will increase our cash levels, but broadly, we'll be invested and we'll draw them down when we can see good opportunities.
Thanks, Geoff. We've got a question from Paul. "Why the sudden drop in Thorney Opportunities?
Yeah, Martyn, have you got a strong view on that?
Not a strong view. Obviously, it had a really strong performance from a share price perspective last year. I think it was up over 40% through the last financial year. I think share price up until close of business last night was down about 11% this financial year. There would have been a little bit of NTA decline there and a little bit of widening of the discount. It is sitting around a 40% discount today, but it was about a 35% discount at the end of last financial year. I'd say just a bit of a correction after the strong share price performance over the last financial year.
Yeah. Also, what you tend to find is sometimes because there can easily be periods where there's just a lack of liquidity. When the market's a bit volatile, there could be a lack of buying. If there's a seller, then all of a sudden, they push the price down quite a bit, particularly in periods where there's a bit of volatility, which has been over the last couple of weeks.
Thanks, Geoff and Martyn. We've got a question from Graham for Geoff. He says he's getting worried about the number of new funds and Geoff seems to be phasing himself out in terms of the seminars. Is this a reason for the various share price declines?
First of all, the share price haven't declined. They've actually all gone up, particularly since we've announced our results. Secondly, I suppose one thing that people have got to realize is I think we're what are we? Are we up to 70 people? Do you know how many employees?
65, I think.
Yeah, 65 employees. On the investing side, we've nearly got 17.
20.
Twenty, geez, twenty investing professionals, which have significant experience. In terms of managing the portfolios, they have been managing the portfolios. I can go on all the webinars, but there is no value in me being on the webinars if I am just sort of there as the figurehead where in WAM, Martyn, myself, and Jesse, we manage the portfolios. That is why it makes sense to be here. Yeah. Does that answer the question, April? Was there any parts of the question I missed?
No, I think you covered it off. Thanks, Geoff. We've got a question from Trent that's, I think, for Martyn. I think Geoff has already touched on it a little bit before, but can you please speak to the amount of cash that's currently held in WAM portfolio and where you see this level sitting?
Yeah. Just to reiterate what I said earlier, I think at the end of February, we were 7%-8% cash. AOF, which is one of our discount assets, has announced a special dividend late last month, which has gone ex this month and will be paid in the coming days. That is cash receivable for the fund. That takes us to a little over 11%. When you add in AOF and GDC, we are getting closer to 20% given they have both sold their underlying investments and are just waiting for the settlement of those investments to return capital to shareholders.
As I said earlier, sitting with a bit of dry powder in the portfolio obviously protects us from some of the volatility at the moment and gives us the opportunity to selectively deploy that capital in opportunities as we do see discounts widen through this period of volatility.
Martyn, we've had a few questions and we've touched on it before. One question is from Ian on WAM had holdings in Platinum and Platinum Asia Investments at the end of February. Will WAM be supporting the PGF alternative?
Yeah. I think Geoff touched on it earlier.
Is that yes, we will be or?
No, I was more just, I'll take the question since there was a silence. Look, I think it's fluid, the situation. I think when they came out with the announcement, they were reporting a 6% premium to the cash adoption because of the share price premium of PGF. We've got relatively small holdings there, but as Geoff said earlier, consideration would be given to the premium of the stock option versus the cash adoption at the time of conversion, the liquidity of PGF being the acquirer, and an assessment on what we think the potential flow back might be from Platinum investors who want to exit on market. Obviously, as we saw with Templeton, the larger the premium they are, probably the more unnatural holders take the scrip option, which causes undue pressure on the acquirer's share price post-transaction. A few moving parts.
I think Geoff said earlier as well, given where the dynamic is live today, we'd probably be inclined to take cash over scrip. That is where our head's at at the moment. Yeah, watching it, if the transaction goes ahead, watching where the dynamics will end closer to the endpoint.
Thanks, Martyn. Ian has asked, "Glenon is trading at a 35% discount to NTA. Why doesn't someone buy it like WAM Strategic Value?
Very good point. Very good point. The tough thing is when it floated is before we had WAM Strategic Value set up. I personally put some money in at a dollar. And so I've got a reasonable position in the company. Obviously, I'm not that pleased it's trading at a big discount. Something will work out eventually on Glenon. It would be, to me, it's just too much of a conflict of interest if, as I have a position, then WAM builds a position in Glenon as well.
Thanks, Geoff. On this topic, Trent has asked about WAM Global, actually. How do you protect against internal biases and interest on this investment?
Yeah. I mean, I suppose it's like you just got to be aware of that. We're managing the portfolio as if we're managing the portfolio. Our view was when it was trading at a sort of that 18%-20% discount, it was too big a discount. We didn't sell any then. I mentioned, it would actually be in our interests if we didn't own any shares because we'd get paid a management fee on whatever the money would be used for. We currently don't get that in WAM. Just like to me, there's nothing wrong with having conflicts of interest. You just got to be aware of them and you got to act independently. That's what we focus on. Also, there's nothing wrong with having inside information because we're given inside information all the time by companies.
The only thing that's wrong is if you trade on it, then you go to jail. Yeah, again, with conflicts of interest, we're aware of them and we'll do what, as the portfolio managers of WAM, we'll do what is in WAM's best interest.
Maybe just following on from that, Geoff, one of the questions that was asked earlier was our holding in WAM Global? I do not think we came back to it. We are a little over $ 18.1 million, about 5.1% of the company.
Sorry, 18.1?
18.4 million shares.
0.4 million. Okay.
A little over 5.1% of the company. I think if we look at WAM Global, it has been a really strong performer for us, in particular over the last two years. Obviously, it went from a premium to a discount at the time we went into the Templeton transaction. We have talked to some of the dynamics there in relation to Platinum and potential for selling pressure. The investment team there have delivered plus 20% performance over the last two calendar years. We have seen that discount narrow, as Geoff said, from that 18% to live around about 9%. From our portfolio perspective, it is delivering a really healthy, fully franked income as well, which is allowing us to pass that fully franked income through to our investor base. Not one that we want to hold forever.
As the discount narrows, we'll look to opportunistically sell that one down, as Geoff has said.
Thank you. The next question comes from Andrew. He says, "MFF Capital Investments is still trading at a 10% discount. Is there any interest?
It's probably not a big enough discount for us. We were in MFF when it was a bigger discount. We were in the other Magellan funds. We actually switched out of MFF into the other Magellan funds because we thought it was more likely that they would do something in terms of capital management, which they ended up doing. If MFF was a 20% discount, it would be more interesting from our perspective.
Thanks, Geoff. We've got a question on Stephen, and he says, "You touched on this at the start of the webinar, Geoff. However, can you please explain the investment rationale for continuing to hold a substantial holding in the NAOS Small Cap Opportunities Company?
Yeah. I probably did not really touch on why we are shareholders. In terms of the, yeah, it currently makes up, I think, 1.47% of the portfolio. The way that NAOS performed, which has been incredibly disappointing, we think there could easily be something has to happen. I do not think NAOS can continue as they have been because the performance has been disappointing. If we can get out of NTA, then we are very interested in we can move on to something else. Yeah, the performance has been disappointing.
Thanks, Geoff. We have a question from Charles, and this is for Martyn. "What is the latest on KeyBridge? Is Bolton any closer to jail?" He says he was a KeyBridge shareholder until Bolton blew it up.
Oh, hey, Martyn, you've been in a to me, I think the KeyBridge guys listen to all this, and we put this on our website. Actually, we're currently in court, and actually, I think we're waiting for a judgment. It's probably, sorry, we take your question. We hear your question and hear your comments, but probably best if we don't. What are we doing? Actually, do we own any in, oh, I think we, yeah, we own.
A tiny little bit. Yeah. I think we leave it there.
800 worth in WAM.
Yeah. That's all we can see on that one.
It's not relevant to WAM yet.
The next question comes from Graham. "Could you advise which companies are trading at NTA or a premium?
Now, Graham, of our listed investment companies?
I assume that's what Graham means. Yeah.
Yeah, yeah, yeah. Martyn, have you got the figure there?
Yeah. It is WAM Capital, WAM Active, WAM Research, WAM Micro Cap, and WAM Leaders is at NTA of our stable. WAM Micro Cap's the largest premium in the stable at the moment, around about that 8%-9%. Obviously, markets are moving around a little bit, so a bit of volatility there. The other three are at a low single-digit premium, and Leaders is kind of oscillating between a very small discount and small premium. It is there or thereabouts.
Thank you. The next question is for Geoff, and it comes from Kieran. "The government's proposed changes to the super legislation was narrowly not passed," which you touched on earlier. "But specifically, what are your views on the market environment if unrealized gains are taxable?
Initially, it's only unrealized gains in super funds, and it's people that have more than $ 3 million. It really will impact small business and farmers mainly. One of the negatives we see is it sort of takes people's aspirations away. The real risk is if it spreads out from there because you want to encourage people to invest risk capital to try to get returns. If you want to look at an example of what's happened globally in Norway, they brought in taxes on unrealized gains, but at a higher level, not in super funds, just taxes. I think half of the richest people in Norway, and I think their first unicorn, like a technology guy, they've all left. They've gone to domicile themselves somewhere else because they get negatively impacted.
Taxing unrealized gains, if it was broadly the tax on unrealized gains, why would you, if you're a young entrepreneur, set up a technology company? You could be losing money for years, but the value of your business might go up a lot. Then you've got to pay tax on something that may never eventuate. You may never get that value. To me, it's not a great tax.
Thanks, Geoff. We've got a question from Martyn from Andrei. "Do you own Morphic Ethical Equities Fund?
We do not within the WAM Strategic Value portfolio. MEC, I think discount is around about 10%-12% at the moment. We do, however, have a holding in Future Generation Global, FGG. Geoff and I are both on the investment committee of FGG. At a point in time, we were invested in the unlisted version of the Morphic Ethical Fund. We were increasing our investment, and there was a line of stock in the LIC at a discount. We took the stock at a discount, and the plan was to arb that out as it went back to NTA parity. Unfortunately, that has not occurred. More recently, we have been accumulating, or FGG has been accumulating stock, changed substantial recently. The company is going through a bit of capital management initiatives at the moment. It does have a kind of capital management strategy at play.
Discounts come in, but again, just with potential perceived conflicts of interest, we haven't muddied the waters and acquired it in WAM as well as having a holding in Future Generation Global. We tried to keep those two separate.
Thanks, Martyn. Trent has asked, "Direct discount assets like Lark and Dusk make up only a small part of the fund. Can you share your thoughts on these investments and their role in the strategy moving forward?" Acknowledging we did touch on Lark a little bit earlier.
Yeah. I mean, Global Data Centre, you could argue that was more an operating business that we put in there, and we ended up making very good money on. AMP, we've had that at various points in time and made some good money on it. Effectively, what we've focused on is buying assets at a discount. There are various periods of time in a cycle where operating businesses will get sold down and trade below the value of their assets. Even though our main focus is on the closed-end fund sector, there are 80-odd companies in that, and there are more listing recently. We'll look at that, and we'll look at also REITs that are trading at discounts, but we've got to be confident.
As we've got AOF effectively was a REIT trading at a discount, we could see a clear catalyst that the money that they were going to sell all the assets and give the money back. It's really trying to find those companies that are trading at discounts. As you said, like the Lark one, it's a minuscule position. What is it? Is it less than 1% of the portfolio or 0.5% of the portfolio? Literally, and Dusk, 0.3%. Again, Dusk was a discounted value asset play, which we'd been letting some it rallied strongly since the price we bought it at, and we'd been selling some. To me, it's again, they could be a big part of the portfolio. It just depends what value. Say all the banks traded at a 30%-40% discount to NTA. They're not at the moment.
Combank's trading at a 350% premium or 300% premium. There can be opportunities where operating businesses trade at big discounts to NTA. There's opportunities there. The best one for us was Global Data Centre, which we made really good money on.
Thanks, Geoff. We've got a question from Gary. "WAM Global recently announced an increased dividend and a special dividend. Regal Asian Investments and VGI Partners Global Investments have increased their dividends from $ 0.05 to $ 0.06. Can we hold these companies to collect dividends?
We can, but that's not our main focus. That's sort of the side benefit. Our main focus is getting as close to NTA as we can, buying at a discount and selling close to NTA and making profit that way. The secondary benefit is getting some very nice fully franked dividends.
Thanks, Geoff. We have a question from Angus, which is also for you, Geoff. "I see you are starting a LIC with monthly dividends. Any chance of WAM Strategic Value paying quarterly dividends?
Oh, actually, yeah. We had it on our slides today. I think it was the second last slide. We talked about, yeah, WAM Income Maximizer, WMX, which we lodged the prospectus for about a week ago. That is pretty much it's interesting you say that. The reason we've created this new company and I think someone asked a question earlier on about, "Are you doing all these new companies?" The reason we created this was because probably for the last 5 to 10 years, people have been asking us, "Can you pay more regular dividends?" With the LIC structure as it is, historically, we've paid six-monthly dividends. People have said, "Look, will you pay quarterly dividends?" We haven't been that keen.
Over the journey, a lot of people have been saying, "Can you pay monthly dividends?" We did a survey at the end of last year just asking people about dividends, and they said, "Yes." I think 63% of the people that responded said they'd like monthly dividends. We hear clearly what you want. Probably for the last four years, we've been looking at creating a product that can do that. We started with a blank piece of paper and a product that can give you the maximum return with the minimum risk. That is where WAM Income Maximizer comes from. Because you're a shareholder, you get an entitlement. If you want to apply for shares, you can go onto our website and apply for shares. We put $ 180 million worth of stock aside for all the WAM entity, our 130-odd shareholders.
Yeah, this one will give you monthly income. We specifically created this, and it's broadly 60% equities, large caps, and 40% debt. It's high-quality debt, investment-grade debt, and high-quality equities. We'll use our traditional way of investing in both equities and debt to get the best returns for shareholders over time. This will be our monthly income product. The plan is it'll be really interesting to see how this goes because, yeah, there are other monthly income products listed. There's a couple which trade at consistent premiums to NTA. I think there is something people, as you quite rightly pointed out, do want more regular income. Historically, we've held off. Depending on how this goes, this may change our view in terms of how we pay the dividend.
I won't say we'll never change, but the plan is in the short term.
Thanks, Geoff. We've got a question from Laurence. Laurence has asked, "Which current holding that you already have built a good position in, are you most positive about and why?
Oh, well, see, the easy one is AOF because we're going to get our money back. So it's just to annualize. What annualized return is it at the moment, Martyn?
If we get the full proceeds that we expect, it's 4% return, about 13% annualized return.
Yeah, yeah. That's incredible confidence with that one because all the assets are sold. Yeah, actually, we're still buying one of them. We're pretty confident in. To me, one of the interesting ones is Carlton Investments. It's just interesting because it's a very big discount. I can't see a short-term catalyst. We've got a very small position. It's 2% of the portfolio, but at some point in time, we'll happen there. Martyn, is there any others you're?
I assume you thought of that, but more just.
Which one? Are we still buying it?
No, more Perpetual pick.
Oh, yeah.
This one we've traded exceptionally well as the discount's blown out over time. Someone was asking the question earlier about publicly us being active and whether through the media or calling shareholder meetings. I think Perpetual and PIC is one that we've played behind the scenes very well. We've bought that one as the discount's approached 10%, and we've been able to dispose of it as the discount's narrowed or it's traded at a premium. It has been one that's been very cyclical, that share price premium. Obviously, Perpetual's going through a bit of a corporate restructure at the moment. It's their only equity-listed investment company that they've got, and it's just about 10% of our portfolio at the moment. As we've been able to buy it at a big discount. Either naturally or unnaturally, I think that one will close at some point.
I'd be confident in that one. Wouldn't you, Geoff?
Yeah, I think it's a pretty fair assessment.
Thanks, both. We've got a question from Greg. He's asked, "Cadence Capital and Cadence Opportunities Fund have traded at discounts to the NTA. Would you consider including these LICs in the WAM Strategic Value portfolio?
Yeah, it's a bit tricky. With Cadence Capital, Carl worked with us for a while, and we helped him set up Cadence Capital, the first LIC. We have got a conflict of interest there. We actually get a very small part of the management fee there. That would be, yeah, that would not be fair on you guys. The other one, the Opportunities Fund, that is the second one he did, which is not very liquid. Yeah. To me, that could be interesting. It could be interesting.
Thanks, Geoff. We've got a question for Martyn from George. "Are you still invested in the US Masters Residential Property Fund? George said he notices that Global Value Fund recently purchased more units in URF and is wondering what your view is.
Yeah, so it's actually one that we've disposed of more recently. The share price had a really strong rally at the start of the financial year. Share price got up to $ 0.415, which was significantly ahead of our cost price. We took some profits from that one. NTA at the moment, mid-60 cents. There were a few risks that we could see with that one. I think on paper, it looks like a really solid discount. Obviously, they're going through the wind down, and they did come up with positive news from a tax perspective. The portfolio is levered, so there's debt in the portfolio, high interest costs. Obviously, interest rates have gone up a lot. As they renew that debt facility, it'll increase operating costs there.
While they have exited investments at close to book value, there is a 6% selling fee in the U.S. And because of the leverage in the portfolio, grossed up, that's about a 10% haircut that you'd take. And then just a view on the U.S. property market. We did a bit of analysis on the investments that they hold, relatively concentrated areas. As they do go through the disposal, there's a small risk that they kind of flood the market from a supply perspective, which will push down prices. And then I kind of view that potentially they've been selling the better assets and kind of hold on to the rump of the carcass, for want of a better term. Look, not saying we wouldn't hold it again, but at kind of low 40s, we were happy to take the capital off the table there.
If the share price goes down, great. Otherwise, there's plenty of opportunities at the moment that we can deploy that capital elsewhere.
Thanks, Martyn. We've got a question from both David and George. "Why do you hold WCM Global Growth, and what is your outlook for the company?
Happy for me to go there, Geoff?
Yeah, yeah. Yeah, Martyn, happy.
No worries. Look, again, it was just a discount to NTA. The WCM guys do have really strong long-term performance. Geoff and I have followed them pretty closely from a Future Generation Global perspective. They're one of the managers in Future Generation Global. We followed them and their performance for a long time. They've got quite a unique investment philosophy focused around the culture of the business that they invest in. That has delivered strong performance over time. Performance more recently, they went through a challenging period of performance. Sentiment bled into the share price. That kind of supply-demand imbalance provided us an opportunity to pick some up. It's not a big position in the portfolio. However, it was one that opportunistically we were able to pick up at a discount. We think the investment team can deliver.
They have over a long period of time. Hopefully, they can get back on the back of strong performance. The market will appreciate that, and it will trade closer to NTA, at which point we'll be happy to exit with NTA uplift and that share price narrowing and kind of compounding our return, hopefully.
Thanks, Martyn. Another question for you from George. "At last week's webinar, Oscar and Tobias said they've been buying AMP, which is trading at a discount to NTA. Is this a company that WAM Strategic Value would consider investing in?
Yeah, I think Geoff touched on AMP a little bit earlier. It's been one of the positions we've had in the portfolio. And one, we made a fair bit of money out in that discount asset perspective back in late 2022, early 2023. I think we were buying it at close to $ 1 and sold it twice at close to $ 1.30 as the share price went through a bit of volatility. And they had some extensive capital management. Definitely one that's always on our radar, given we've had a positive experience with it. Obviously, leverage the benefit of the wider WAM investment team with Oscar Tobias and their team's views on the stock. One that we're monitoring along with the other team at the moment.
Thanks, Martyn. I've got a question from Derek for Geoff. "In answers to several questions, you've mentioned waiting for the register to tighten up. What do you mean by that?
Effectively, the drivers for a listed investment company to trade at NTA or a premium is when there are enough buyers at NTA or a premium to NTA. What you find is what tends to happen is when a share price trades at a discount, then people are selling because they are selling. Why would you sell now when you know the NTA is $ 1.29? Why would you sell at $ 1.14 below what it is worth? There is effectively excess supply. What I mean by tighten up is that excess supply reduces. Effectively, if people are selling at a discount, you have got excess supply. Eventually, you do not have any excess supply, and the NTA, the number of sellers disappears. There is less selling, and then you just need the same amount of buying or a bit more buying.
The share price moves from the discount to trade at NTA and if not a premium. Tighten up means reduction in sellers, yeah, and then eventually increase in buyers.
Thanks, Geoff. We've got a question from Jim who's asked, "Why has the fund performed poorly and what were the original investments?" Sorry, "Were the original investments wrong?
No, I don't think the original investments were wrong. On a risk-adjusted basis, you could argue the funds performed reasonably well. From my perspective, I'm a large shareholder. I suppose you're all shareholders because you're on the call. Sorry, back on the volatility of the market, it's 11% and a bit over the period of time the fund's been running. The fund volatility is only 8%. You'd assume what that means is you're taking less risk. Yeah, we've taken less risk investing in the fund. Actually, excluding our costs, which you can't, but excluding costs we've performed over that period of time in line with the market. To me, that's disappointing. What could we do differently? Our strategy has been buying the discounted asset plays.
The problem is it just takes time for them to be realized. What could have we done differently? Maybe we could have, first of all, we could have accepted cash for WAM Global, and then we would not be talking about WAM Global. We probably could have had bigger positions. If we had bigger positions in the positions, in the companies that were bid for, like Magellan, we had positions in both the Magellan funds. We had positions in West Oz and Osgrowth that got bid for. We had positions in, what was that one in Melbourne, AEF?
Yeah, AEG.
AEG, sorry. What was that called? The old, anyway, then another listed investment company that was taken over. If we'd had bigger positions in those and probably smaller positions in, well, and then, yeah, smaller positions in any of them that went down. That's what could have we done differently? Would have the performance been exceptionally different? It would have been, if we had bigger positions in the winners and smaller positions in the losers, it actually would have been better. Would have the portfolio increased 50%? No. This is you're buying assets at a discount. This is a medium-term play where you're trying to do the market plus the discount because the underlying funds, you hope perform in line with the market. Your discount is where you make the profit.
Yeah. I think, Geoff, as you said, that's all with the benefit of hindsight. As I look back, kind of maybe some missed opportunities that we've had. Again, with the benefit of hindsight is probably the income, the fixed income sector with Partners Group, KKC, Neuberger Berman, two out of three of them have closed shop. The third one, the discount's narrowed materially. We did a fair bit of work on them at the time and just couldn't get comfort around the risk that investors were taking to get the yield. While there was a good discount on offer, and on paper, they looked like great opportunities, it's how confident we were that we were going to get that capital back and that the discount wasn't going to be eroded by loss of value through the underlying investment.
I think all of that is with the benefit of hindsight. Yeah, you can't get it right all the time.
Thanks, Geoff. Thanks, Martyn. Martyn, while I've got you, we've got a question from Dennis. "With the market correction, stock volatility, and many LICs trading at a discount to NTA, do you see this as a golden opportunity to invest?
Yeah. Look, obviously, volatility always brings with it opportunity. What we're seeing at the moment, and I think Geoff touched on it earlier, what you tend to see in initial periods of volatility is the registers of LICs are a little bit slower to react. While there's some big discounts on offer at the moment, those discounts have narrowed a little bit over the last couple of days. Live discounts are not as attractive as they were. For us, you kind of want to get a bit of comfort that the market is not continuing to fall. You do not want to try and catch a falling knife. Obviously, we want the volatility to shake out a little bit, registers to settle. I think there will at that point be lots of opportunities for us. As we've already said, our cash is relatively healthy.
We've got a couple of assets that are going to return cash in the next couple of months. We are in a good position to take advantage of those opportunities once the volatility has died down and things have shaken out a little bit.
Thanks, Martyn. George has asked you, Martyn, what is the maximum percentage holding a stock that you can have in the portfolio?
Yeah. There is no hard limits under the prospectus. We've got a flexible mandate to allow the investment manager to express their best ideas. Within the prospectus, we did say it would be formally reviewed if a position was in excess of 20% of the portfolio. That formal review process would be with Geoff as the lead portfolio manager and the rest of the board. We do not have to necessarily sell if we do breach that soft 20% limit, and we could continue to accumulate. As long as the investment manager and the board were comfortable with the risk-return we were taking and the concentration we were taking in the portfolio, there is no hard limit.
Thanks, Martyn. We have a few questions for Geoff. We've got a question from Narva who's asked, "Why not keep stocks that pay dividends?" Geoff said that doesn't align with the strategy of buying at a discount to NTA. If a stock provides strong cash flow through dividends, isn't that achieving the same goal over time? Am I misunderstanding WAM's strategy?
No, but what we're focusing on mainly is capital risk. Say we buy a stock at $1 and it pays good dividends and the stock falls from $1 to $0.50, then you wouldn't be very happy with us. If we can buy the stock at $1 and it stays at $1 and it has assets, we'd hope it goes from $1 to $1.20, $1.30, or $1.10, and we get a dividend as well. WAM's strategy is buying undervalued assets and paying you fully franked dividends from the capital we make and the tax we pay. Along the way, we get fully franked dividends from the companies we invest in. You're close to the right track. What else was the?
Yeah, no, I think that covers it up just in terms of the strategy, so that's good. We've got a question from George and Todd. "Can you comment on CD1, CD2, and CD3? They're the CD equity funds.
Yeah, big discounts. At various points in time, we buy them and we think at some point in time we'll get close to the money back. Yep. Highly illiquid, so we can't get much in the way of positions.
Thanks, Geoff. It looks like this is our last question that we've got from Irene. "Are monthly dividends good for growth?" I'm assuming she's referring to the WAM Income Maximizer.
Yeah, the WAM Income Maximizer, we specifically put that together. The dividends and the debt that we invest in, in Income Maximizer, that'll cover the dividends. It really depends how the underlying assets perform after that, whether we get the capital growth or not.
Thanks, Geoff. We've had one more sneak in from Jim, the last question. "Have you had a look at Pacific Current?
Yeah, Pacific Current's really interesting. Yeah. We've got a really small position there. The discount just isn't big enough. The interesting thing is the chairman who I spoke to recently, he accepted the recent buyback. They're saying the last three funds they've got, even though it's trading at about a 17% discount to NTA after the buyback, I think they're saying that the last three fund managers, they don't expect to sell them in the foreseeable future. You just can't see the catalyst. To me, I think the chairman accepting the buyback was sort of indicating what his view is.
Thanks, Geoff. Thanks, Martyn. Thanks to everyone for submitting your questions. This now closes the Q&A component of the webinar. If we're unable to get to any of your questions today, I will definitely contact you afterwards. I'll now pass over to Geoff for closing remarks.
Yeah, look, thanks, April, and thanks, Martyn. And thanks for all the shareholders for engagement. Again, this was a very high-quality level of questions and a long webinar. This is your company and we're managing it on your behalf. Please, our plan is to have the share price trading at NTA, if not a premium, over the medium term. If you do have any questions or comments, please come back to us. Thank you very much.