Perpetual Credit Income Trust (ASX: PCI) (“PCI” or the “Trust”) is a listed investment trust (LIT) designed to provide investors with regular monthly income through an actively managed portfolio of diversified credit exposures by asset type, issuers, credit quality, maturities, and capital structure. Listed in May 2019, the Trust is managed by Perpetual Investment Management Limited (the “Manager”) and its highly experienced nine person specialist credit and fixed income team led by Michael Korber. PCI is based on a ‘core/plus’ strategy, with a core of at least 30% investment grade and a maximum 70% in high yield
and loans.
PCI utilises an unconstrained credit strategy that seeks to generate a monthly income of RBA Cash Rate + 3.25% p.a. (net of fees), the equivalent of 7.6% p.a. based on the RBA Cash Rate of 4.35% as at the date of this report. The Manager endeavours to do so through a flexible investment approach that allows active portfolio positioning in order to focus on the most attractive credit and fixed income opportunity set of Australian securities and securities issued by global participants in the Australian market. While the unconstrained nature of the strategy may, on the surface, appear to introduce greater risk, the intention is quite the contrary – it is designed to mitigate risk and be conducive to a more consistent income profile over time with limited downside risk. As at 30 June 2024, 47.6% of the portfolio was invested in Australian corporate loans through the Perpetual Loan Fund, and circa 20% in securitised issuances including RMBS, CMBS and ABS. With respect to credit ratings, 36% of the Portfolio was invested in Investment Grade, 17% in high yield, and 42.4% in non-rated securities. As is evident from the changes in the portfolio over time,
the portfolio is actively managed with the Manager rotating the portfolio to attractive risk-adjusted opportunities identified including secondary market transactions, with capital preservation being front of mind for the Manager. The Trust has consistently met or exceeded its return target of the RBA cash rate + 3.25% p.a., net of fees and expenses, with the Manager providing a diversified portfolio of credit exposure across sectors, security types and credit rating spectrum to achieve the target return.
IIR has maintained a Recommended Plus rating for Perpetual Credit Income Trust (ASX: PCI). PCI provides a differentiated investment offering in the domestic fixed income LIT market, through an actively managed exposure to a diversified portfolio of credit securities to deliver a monthly income stream to investors. Investors benefit from the significant experience of the investment team in credit and fixed
income markets with senior members of the team having experienced numerous market cycles. The Trust has consistently achieved its target return since listing with the investors benefiting from the predominantly floating rate exposure in an increased interest rate environment. While the portfolio is exposed to securities across the credit rating spectrum, we consider the Trust to be at the lower-end of the risk spectrum when compared to its LIT peers given its investment grade exposure and the nature of the direct lending exposure, which is focused on higher quality companies. The recent capital raising will benefit investors through increased diversification in the portfolio and improved liquidity.
To view the report click here.