Specialist credit fund manager, Metrics Credit Partners, is entering the listed trust market, with a fund that offers high income returns from a portfolio of Australian corporate debt.
MCP Master Income Trust (ASX: MXT) will be the first LIT to list on the ASX dedicated to corporate lending, offering direct, diversified exposure to Australia’s corporate loan market, a market dominated by regulated banks and not easy to access for non-bank investors.
MCP has been in business since 2011. It is 65 percent owned by its investment team and 35 per cent by National Australia Bank.
The investment team includes Andrew Lockhart, Justin Hynes, Graham McNamara and Andrew Tremain. All have institutional banking or funds management backgrounds.
MCP is targeting a minimum subscription of 50 million units at $2 per unit for the trust. ASX listing is scheduled for October 9. The fund surpassed its minimum subscription of $100m on the opening day of the offer.
Metrics launched a wholesale fund, the Metrics Credit Partners Diversified Australian Senior Loan Fund, in 2013 and two more wholesale funds since then. It has more than $2 billion of funds under management.
MCP has invested more than $3 billion in 80 loan transactions since June 2013. It lends to public and private companies and also provides project finance.
MCP puts the size of the Australian non-financial corporate debt market at $1.1 trillion.
The Diversified Fund has produced an average return of 5.04 per cent a year since inception.
The new LIT is a feeder fund that will invest in MCP’s established wholesale funds. It will have 70 to 100 individual loans in its portfolio, with no more than 5 per cent of the trust’s assets to be invested in a single borrower.
The manager is targeting a return of the Reserve Bank cash rate (currently 1.5 per cent) plus a margin of 3.25 per cent, net of fees.
Borrowers in the LIT portfolio will be predominantly Australian domiciled. Loans will be a mix of secured and unsecured, senior and subordinated, investment grade and sub-investment grade. The majority of loans will be to companies rated BBB and BB.
Investors will pay 86 basis points a year in fees (less if the minimum funding target is exceeded).
The offer has been structured to eliminate an immediate decline in net asset value, which usually results from the expenses involved in listing. The manager will pay the establishment costs of the offer with the proceeds of a loan provided by the trust.
Over the life of the investment management agreement the manager will repay the loan, including interest.