Plato Investment Management has announced a $200 million entitlement offer for its fund, Plato Income Maximiser (PL8).
In response to increasing investor demand for dividend payments as a replacement for their cash and fixed interest income, Plato will undertake a capital raise targeting $200 million.
The offer consists of one new share for every 1.6 shares held by existing eligible shareholders on the record date of 13 August 2019.
Shareholders can also apply for shares in excess of their entitlement with an over-subscription facility.
Plato managing director Don Hamson said the offer includes benefits like "a larger market capitalisation, which is expected to attract greater research coverage and provide more liquidity, a more diverse shareholder base, and a lower management expense ratio".
Plato highlighted the diverse nature of PL8, which they said had around 100 stocks across small-cap, large-cap, and gold stocks.
Senior portfolio manager Peter Gardner said this diversified portfolio means the fund will be able to generate market-like returns with the same level of income as some of the high income stocks.
"You're going to be get the advantages if there's a mining boom, you're going to get advantages from some of the tech stocks, or some of the healthcare stocks, like CSL," he said.
PL8 is the only LIC to pay regular monthly fully franked dividends, which they will continue to do after this raise.
The fund paid 12 monthly 0.5c fully franked dividends for the year to June 2019 equating to a dividend yield of 5.5%, or 7.8% including franking credits, on the offer price of $1.10. Including its special dividend of 3c a share, the dividend yield was 8.2% and 11.7% with franking credits.
Hamson added that it is timely for retirees, in particular, to reconsider their income generating asset mix, saying it is becoming "increasingly difficult for retirees to live off the income from cash and fixed income" given current 1% RBA cash rates and 10-year Commonwealth Government Bonds trading at a yield below 1%.
"Given the recent election result, retirees can continue to bank on receiving franking credits from Australian share investments and should consider taking advantage of the higher income on offer from them" he said.
The closing date for both the Entitlement Offer and the Broker Firm Shortfall Offer is 30 August 2019.
This week, Magellan Financial Group also announced it plans to raise $275 million in capital to fund growth opportunities, including the development of a retirement product.