Argo Global Listed Infrastructure Limited (ASX: ALI) Review

March 20, 2024

Argo Global Listed Infrastructure Limited (ASX: ALI) is a listed investment company (LIC) that listed on the ASX in July 2015, raising $286.1m through the issue of 143.1m fully paid ordinary shares at $2.00 per share. At 29 February 2023, ALI had 177.5 million shares on issue and a market cap of $385.1 million. Argo Service Company Pty Ltd (ASCO) is the Manager of the Company. ASCO is a wholly-owned subsidiary of Argo Investments Limited (ASX: ARG). ASCO has appointed Cohen & Steers Capital Management Inc. (“Cohen & Steers”) as the Portfolio Manager. Cohen & Steers is a global investment manager in long-life assets including infrastructure, real estate securities, natural resource companies, commodity futures and fixed-income securities. Cohen & Steers was founded in 1986 and had in excess of AUD$116 billion of AUM as at 30 September 2023, with AUD$11.7 billion invested across global infrastructure strategies. ALI seeks to provide investors a total return, consisting of capital growth and dividend income, from a diversified long-only portfolio of global listed infrastructure securities. The Portfolio Manager seeks to outperform the benchmark over the long-term, however, given the nature of the underlying investments and the benchmark aware mandate we expect any alpha generation to be moderate. The portfolio is actively managed and comprises 50-70 securities and has typically been heavily weighted to the US. While the portfolio is weighted to US stocks, the underlying assets and operations of companies are often global. The Portfolio Manager has been managing the underlying investment strategy since 2004 and does so with a focus on investing in companies that exhibit: relatively predictable, often inflation-linked cash flows; largely regulated and monopolistic businesses with concession-based, or contracted assets; and high barriers to entry. The focus is on the owners and operators of infrastructure assets. The Manager is paid a management fee of 1.2%p.a of the gross value of the portfolio with the fees stepping down as the AUM increases. The Manager is responsible for paying the Portfolio Manager from this fee.

Independent Investment Research (IIR) has maintained its Recommended rating for ALI. ALI’s portfolio is managed by a highly experienced and well resourced team that IIR holds in high regard with respect to the global infrastructure asset class. While there are a number of listed managed investment (LMI) options on the domestic market focused on global listed infrastructure, ALI is the only LMI structured as a LIC. The company structure pays tax and can pass on franking credits in the form of franked dividends. Given this, ALI is appropriate for those investors that are seeking exposure to global infrastructure with the benefit of franked dividends. The Company has a track record of over 8 years and has delivered on its objective of
delivering a total return consisting of capital growth and dividend income. The Company has traded at an elevated discount in recent months with IIR believing the relative returns of infrastructure as an asset class is a key driver of the discount. We expect the discount to narrow in the event there is a rotation back into infrastructure. A rotation back into the asset class will likely result from economic growth being lower than expected and inflation proving stickier than expected. It will be this environment that will likely see investors reallocate portfolios more defensively.

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