One of Australia's longest running and most respected listed investment companies (LIC) Argo Investments Limited (ASX: ARG) is looking to raise up to $600 million with the proceeds intended to launch a new LIC, Argo Global Infrastructure Limited. This LIC is set to invest in a diversified range of infrastructure-type assets including airports, pipelines, railways, ports, toll roads and electricity utilities.
For shareholders in Argo there are a couple of important points to understand.
Firstly, the funds raised will allow Argo to leverage its trusted brand and grow its external funds under management which adds a new, long-term income stream to the group – a clever move considering the continued demand from self-managed super fund (SMSF) investors for LICs and increasingly for global equity exposure.
Secondly, shareholders will have the opportunity to subscribe for shares under a priority allocation which means they need to decide if they wish to take part in this initial public offering (IPO) or not.
Argo's decision to focus on global infrastructure as an asset class is interesting and is arguably a space more investors should be focussing on…
Many Australian investors are overly exposed to a small handful of stocks, particularly the major banks, BHP Billiton Limited (ASX: BHP) and Telstra Corporation Ltd (ASX: TLS). Given many of these same investors are primarily concerned with receiving a steady stream of dividends coupled with capital preservation, infrastructure-type assets are arguably much more appropriate.
While Argo's new global vehicle is one way to achieve exposure to this asset class, it is unlikely to offer the benefit of franking credits – a factor which is very important to many investors, particularly self-funded retirees and SMSFs.
In contrast, investors who build their own portfolio of ASX-listed domestic infrastructure-type stocks such as Qube Holdings Ltd (ASX: QUB), AGL Energy Ltd (ASX: AGL), or Transurban Group (ASX: TCL) could potentially achieve a portfolio with similar characteristics of income and defence but with the added bonus of some of their dividends having franking credits attached.
