Metrics Credit Partners (MCP) has opened an initial public offering (IPO) for its Master Income Trust with SMSF investors in mind as it distributes monthly dividends and has low capital volatility.
The listed investment trust (LIT) provides direct exposure to Australia’s corporate loan market, which historically has been dominated by banks and therefore difficult for non-bank investors to access.
It will be the first LIT to list on the Australian Securities Exchange (ASX) dedicated to corporate lending and will have exposure to in excess of 50 individual investments, with a near-term target of 75 to 100 investments.
Investors will receive monthly cash income with a target yield of the Reserve Bank of Australia cash rate plus 3.25 per cent a year, currently 4.75 per cent, net of all fees and costs with low risk of capital loss.
“I think for a lot of SMSFs and retirees in the market, the ability to have regular monthly income is a real feature,” MCP managing partner Andrew Lockhart told media in Sydney on Thursday last week.
“If you’re buying into say, a retail corporate bond, you’ll be receiving distributions every quarter.
“Because we’ve got a diversified portfolio of assets, our borrowers are making interest payments monthly, so the ability to distribute that interest income to our investors on a regular monthly basis appeals to them.”
Lockhart underlined that MCP invests in an asset class that did not really provide for capital growth.
“So it’s important that any income we generate is immediately passed through to investors; it’s an investment that appeals to someone looking for stability of capital with income flows via yield distributions,” he noted.
“Retirees, SMSFs and others have different tax rates, so the ability to distribute income direct, pre-tax to the investor in a monthly income distribution I think will appeal to a lot of investors.”
Pinnacle Investment Management director of distribution Matt Dell added monthly income was a key point of difference for the LIT.
“This is the only second listed vehicle that I’m aware of that offers monthly distribution and I think SMSFs will find this appealing,” Dell said.
The IPO is seeking to raise up to $500 million from investors in Australia and New Zealand, which will then be used to invest into MCP’s wholesale funds.
Lockhart said there was already early interest from the market as the LIT had substantial cornerstone investor interest of a minimum volume of $50 million secured last Thursday.
The general offer closes on 19 September with trading expected to commence on the ASX on 9 October.
MCP, founded in 2011, has an experienced investment management team with a proven track record in delivering returns from direct lending to Australian corporates.
It currently manages wholesale funds with in excess of $2 billion of assets.
The manager participates across loan, credit and debt securities markets, in addition to working with borrowers, and arranging and structuring bespoke capital solutions.
MCP is supported by Pinnacle as its distribution partner and Grant Samuel as its financial adviser.