Future Generation Australia

Future Generation Australia (ticker: FGX) is an Australian Listed Investment Company (LIC) listed on the Australian Stock Exchange. FGX focuses on Australian equities and provides investors with access to a group of prominent Australian fund managers, all focused on Australian equities, within a single investment vehicle. Since its listing on September 14, 2014, FGX has been serving investors while also supporting Australian not-for-profit organizations dedicated to children and youth at risk through annual donations equal to 1.00% of its net tangible assets.

FGX's investment objectives encompass delivering fully franked dividends, achieving capital growth, and preserving shareholder capital. The company is externally managed, providing investors with expertise from leading fund managers in the Australian equities space.

Future Generation Australia (FGX) has been operating for nine years since its listing in 2014. During this period, it has facilitated investments in domestic Australian equities while contributing to charitable causes focused on the wellbeing and mental health of young Australians. As of now, FGX has a market capitalisation of approximately $450 million, reflecting its presence as a LIC dedicated to both investors and supporting important social causes.

Investors considering FGX can benefit from its unique approach, which combines exposure to global equities through renowned fund managers with philanthropic efforts to support mental health initiatives.

Future Generation Australia (FGX) invests directly in equities, which are growth/risk assets, making it inherently a growth/risk asset in the context of an individual investor's overall asset allocation. While FGX operates within the LIC structure, offering the advantage of profit retention and income stability, it's essential to note that the income it provides is not guaranteed. Unexpected market fluctuations or shocks could potentially lead the company directors to make decisions affecting future dividend payments.

With this disclaimer in mind, and assuming the investor understands the risk nature of FGX, several crucial metrics to consider when assessing FGX as an investment choice include:

• Long Term Performance: Evaluate whether FGX has consistently delivered after-fee performance at or above its comparison benchmark, the S&P/ASX All Ordinaries Accumulation Index, over an extended period, typically spanning five or more years.
• Dividend Reliability: Examine FGX's historical track record in maintaining or increasing its dividend payments over the long term, ensuring it aligns with your income objectives.
• Investment Holdings: Gain insight into FGX's underlying portfolio holdings, understanding the range of assets it invests in, which can include Australian equities and other securities. This information can often be found in monthly updates or the most recent annual report, and it's crucial for investors to feel comfortable with these investments made on their behalf.
• Fees: Evaluate the cost of investing in FGX, considering the Management Expense Ratio (MER). FGX's MER stands at 1.11% as of the most financial year.

These metrics provide valuable information to investors when evaluating FGX as part of their investment strategy. It's crucial to assess these factors carefully, considering both financial goals and the charitable impact of your investment.

A Listed Investment Company (LIC) is one type of investment fund structure (i.e. shareholder funds pooled together and invested together, either actively by a manager, or passively). Other types of investment funds include Exchange Traded Funds (ETFs) (which can be both actively managed or passive), Listed Investment Trusts, or Managed Funds.

The different structures have their own positives and negatives, which are dependent on the goals of the investor and their own individual investment structure.

Some of the benefits of the LIC structure (the structure of FGX) include:

• It's a closed-end investment vehicle: Meaning the manager has a fixed pool of capital to invest with a long-term mindset, and doesn't have the risk of fast redemptions by investors in a time of market panic.
• They can smoothen out income to the investors: Which can be beneficial for both tax efficiency and emotional mindset, due to being able to retain profits over time (as compared to the trust structure, which must distribute income and crystallized capital gains to the investor in that financial year).
• The income will most likely be in the form of fully franked dividends: Which is an attractive form for Australian retirees due to the franking system in Australia. Since LICs are companies themselves and pay tax in Australia on profits, they receive franking credits paid on the tax they pay, in addition to the franking credits they receive from their investment portfolio. Well-managed LICs ensure their franking credit reserves are sufficient to pay future fully franked dividends (see 'franking reserves' chart above).