I don’t have any strong feelings either way about this one. Basically,
Argo is lending its name (call it brand) to a fund which will be managed by
Cohen and Steers Capital Management. Argo and Cohen and Steers will take
management fees and Argo will invest a token $25 million in the fund.
Think of it as Argo under a newish managing director trying to be a bit
like Macquarie Bank rather than Argo, and I don’t know if I like it (or if the
rather elderly Adelaide shareholder base will like it).
I can’t really see how Argo is adding much value to this process – they
are simply acting as middlemen. Argo’s board and the management of the Global
Infrastructure Fund have no experience in managing infrastructure assets and
that’s why they have outsourced the job to Cohen and Steers.
Global infrastructure is obviously an attractive asset class and there
are limited opportunities to get a pure exposure to this class on the ASX. But
of course, you only want exposure at the right price!
Looking at the prospectus, Cohen and Steers Capital Management’s record
is ok over the last 10 years or so, but you wouldn’t call it fantastic.
The only concerns I would have are that according to the prospectus, 50
percent of the fund’s assets are likely to be invested in US infrastructure
securities. With the US markets at record highs and a low Australian dollar
against the US dollar, one gets the feeling that this fund would have been a
much better idea three or four years ago rather than now (in fact, it would
have been a superb idea three or four years ago). However, further declines in
the Australian dollar are expected, so perhaps Jason (Beddow) and his argonauts
haven’t completely missed the boat, so to speak.
The managers plan to invest all the IPO proceeds in around 30 days.
That is slightly off-putting for me. It smacks of investments being made in
haste.
There is no mention in the prospectus of proposed dividend levels. This
would normally be of paramount importance to Argo Investment’s shareholder base
(who presumably would be significant potential buyers). One also presumes that
dividends will have limited franking given the offshore source of the majority
of the profits, but I’m no expert in this area.
Personally, I won’t be buying in the IPO, there just isn’t enough information
there right now to coax me into making an investment. By this I mean, we don’t
really know what securities the Fund will be invested in (and I know they can’t
spell it out right now, but that simply means potential investors can’t really
value the Fund), but more importantly, we don’t know what the distributions
will be. These two things are very important, and in particular, the fact that
we don’t know what the distributions will be will deter quite a few people.
