Pengana Credit has announced plans for a listed investment trust (LIT), with the firm promising it will deliver “unparalleled” access to global private credit, an asset class that has historically been out of reach for most Australian investors.
The Pengana Global Private Credit Trust (ASX: PCX) aims to generate strong risk adjusted returns, with a high degree of capital protection as well as stable and consistent income, in the form of a targeted 7 per cent per annum cash distribution paid on a monthly basis.
According to the firm, investments will be selected by its specialist private credit team, while Mercer has been engaged to provide investment advisory with the aim of delivering a highly diversified investment vehicle.
Commenting on the upcoming launch, Pengana Credit chief executive Nehemiah Richardson said the trust breaks new ground regarding accessibility and liquidity for global private credit investing.
Namely, PCX will deliver access to illiquid institutional grade assets, primarily focused on accessing bilateral loans to mid-market companies, and make them available to retail investors via the ASX.
“This mid-market segment has reaped some of the best rewards from the tailwinds enjoyed by the global private credit sector in recent years,” Richardson explained.
“These diversified global private credit investments are typically out of reach for all but the largest investors, such as the big superannuation funds and the Future Fund, which have increased allocations to private markets.
“Now, through our listed investment vehicle, everyday investors can benefit from the same returns potential and diversification of global private credit that has been enjoyed by institutional investors for years.”
Expounding on this, Richardson said global private credit adds a defensive aspect to investment portfolios given its low volatility and low correlation to asset classes such as public fixed income and equities.
In turn, he said PCX will be “one of the most diversified global private credit funds on the ASX”.
“Diversification is structurally important to provide liquidity and continued performance through market cycles, hence the trust will provide investors with an elegant way to access more than 2,000 individual loans across 19 underlying funds sourced and approved by Mercer.”
Moreover, Pengana highlighted its intention to offer investors the ability to make redemptions at net asset value (NAV), by way of a quarterly off-market buyback offer.
According to the firm, this solves a key potential issue it has observed with the LIT model and should give investors confidence and price certainty when they choose to realise their investment.
“This is a powerful feature in the context of portfolio construction considerations, allowing investors to confidently access highly sought-after investments in a truly unique form,” Richardson said.
The announcement of PCX comes a year after Washington H. Soul Pattinson, Pengana’s largest shareholder, made a $200 million seed investment to establish a highly diversified portfolio of best-of-breed global private credit investments, alongside the appointment of Mercer as a specialist investment adviser.
Russel Pillemer, CEO of Pengana Capital Group, said success in global private credit is dependent on access to high-quality managers.
“Quality builds resilience in the portfolio and allows us to target a high monthly cash distribution as well as the return profile generally expected from highly rated global private credit investments, along with the ability to offer quarterly redemptions at NAV,” Pillemer said.
“PCX will target loans which are typically individually negotiated and structured, allowing the borrower to obtain legally enforceable protections. This can lead to lower default rates and higher recovery rates than other fixed income alternatives.”
