Perpetual Limited · ASX:PPT
Perpetual — Perpetual Credit Income Trust — Perpetual Credit Income Trust Investment Insights Webinar September 2020
27 slides from Perpetual's conference presentation, September 2020
Slide 1: Perpetual Credit Income Trust Investment Insights Webinar
PERPETUAL CREDIT INCOME TRUST INVESTMENT INSIGHTS WEBINAR September 2020
Slide 2: Important Note
IMPORTANT NOTE This presentation has been prepared and issued by Perpetual Investment Management Limited ABN 18 000 866 535, AFSL 234426 (PIML), as the investment manager for Perpetual Credit Income Trust (PCI). Perpetual Trust Services Limited ABN 48 000 142 049 AFSL 236648 (PTSL) is the responsibl
Slide 3: Your Presenters and Agenda
YOUR PRESENTERS AGENDA KAREN DAVIS Senior Manager, Listed Products & Projects │ Perpetual Credit Income Trust Overview Investor Relations Perpetual Credit Income Trust │ Market Update JAMES HOLT Senior Manager, Listed │ Portfolio Update Investments Distribution Perpetual Investments │ Questions MICH
Slide 4: Perpetual Credit Income Trust (ASX: PCI)
PERPETUAL CREDIT INCOME TRUST (ASX: PCI) A ROBUST, ACTIVE AND RISK AWARE INVESTMENT PROCESS Investment objective Investment guidelines Investment process & target return Typically 50 – 100 assets • To provide investors with Top down monthly income by investing 30% - 100% Investment grade assets2 1 m
Slide 5: Perpetual's Specialist Credit & Fixed Income Team
PERPETUAL’S SPECIALIST CREDIT & FIXED INCOME TEAM OUR SENIOR PORTFOLIO MANAGEMENT TEAM HAVE BEEN INVESTING TOGETHER FOR OVER A DECADE Portfolio Managers Analysts MICHAEL KORBER JP BAE Managing Director Credit & Fixed Income VIVEK PRABHU Senior Dealer / Associate Portfolio Manager Head of Fixed Incom
Slide 6: Key Features of a Listed Investment Trust (LIT)
PERPETUAL CREDIT INCOME TRUST (ASX: PCI) KEY FEATURES OF A LISTED INVESTMENT TRUST (LIT) Feature Description Closed-end structure • Investment Manager has a fixed amount of capital to invest as the number of units issued to investors and capital is not subject to applications and redemptions. • PCI
Slide 7: Market Update
MARKET UPDATE Presented by James Holt
Slide 8: The Uncertainty of Dividends Means the Search for Alternate Sources of Income
THE UNCERTAINTY OF DIVIDENDS MEANS THE SEARCH FOR ALTERNATE SOURCES OF INCOME PCI HAS CONSISTENTLY DELIVERED MONTHLY INCOME SINCE INCEPTION • Traditional income under challenge: For some time investors have seen interest rates on cash and term deposits decline which has led to investors searching fo
Slide 9: Diversification Is More Important Than Ever
DIVERSIFICATION IS MORE IMPORTANT THAN EVER INVESTING IN CREDIT AND FIXED INCOME ASSETS HAS BECOME MORE ACCESSIBLE FOR RETAIL INVESTORS VIA MANAGED INVESTMENTS AND LITs Total asset allocation in SMSFs^ have Typical risk v return characteristics of traditionally been weighted towards various asset cl
Slide 10: Corporate Credit Continues to Provide Compelling Opportunities
CORPORATE CREDIT CONTINUES TO PROVIDE COMPELLING OPPORTUNITIES TO GENERATE ATTRACTIVE RETURNS Australian dollar (AUD) Credit Spreads • Credit spreads represent the risk premium 3 year duration over asset swap spread (ASW) added to a base interest rate (i.e. bank bills) when pricing corporate securit
Slide 11: PCI Unit Price to Net Tangible Assets
PCI UNIT PRICE TO NET TANGIBLE ASSETS WE BELIEVE THE PORTFOLIO EXHIBITED DEFENSIVE CHARACTERISTICS DURING THE MARKET SELL-OFF IN MARCH $1.30 $1.20 • Market conditions have tested the PCI portfolio which we believe has $1.10 proven to be resilient. $1.00 • The full value of the portfolio’s assets are
Slide 12: Portfolio Update
PORTFOLIO UPDATE Presented by Michael Korber and Anne Moal
Slide 13: PCI's Target Portfolio Construction
PCI’S TARGET PORTFOLIO CONSTRUCTION A ROBUST, ACTIVE AND RISK AWARE INVESTMENT PROCESS • Our top down investment process allows us to invest opportunistically in the broad credit universe: o Along the entire credit spectrum, in different companies, sectors and structures o In assets denominated in f
Slide 14: Global Investment Universe with a Focus on Australian Issuers
GLOBAL INVESTMENT UNIVERSE WITH A FOCUS ON AUSTRALIAN ISSUERS STRONG IN-DEPTH, BOTTOM UP RESEARCH • We have a flexible investment strategy that allows investment in credit and fixed income assets diversified by asset type, credit quality, issuers and countries. • However, our preference is to focus
Slide 15: Dynamic Investment Strategy
DYNAMIC INVESTMENT STRATEGY DIVERSIFICATION ACROSS ASSET TYPE, CREDIT QUALITY, MATURITIES, COUNTRIES AND ISSUERS Asset type Credit quality Country/Issuer • Corporate bonds • Investment grade core • Australian focused exposure: • Private loans • High conviction allocation to − Australian domiciled, a
Slide 16: Investments in High Yield and Loans: Priority of Payment
INVESTMENTS IN HIGH YIELD AND LOANS DESIGNED TO PROVIDE ATTRACTIVE RETURNS WITH WELL MANAGED RISKS Typical capital structure of a company We are looking for assets that aim to FIRST Core investment SENIOR SECURED DEBT provide Bank loans, first lien and bonds universe High coupons SUBORDINATED SECU
Slide 17: Investments in High Yield and Loans: Research and Capital Structure
INVESTMENTS IN HIGH YIELD AND LOANS FOCUS ON RESEARCH AND CAPITAL STRUCTURE • Many Australian companies (listed or unlisted) choose to be unrated, but that does not necessarily mean they are not quality companies. • In addition to focusing at the top of the capital structure, in-depth research is re
Slide 18: Investments in High Yield and Loans: Due Diligence Process
INVESTMENTS IN HIGH YIELD AND LOANS UNDERTAKING AN EXTENSIVE DUE DILIGENCE PROCESS TO SCREEN ISSUERS AND IDENTIFY THE MOST ATTRACTIVE ASSETS Legal documentation review Capital structure review Loan documentation is not standard. It is key to understand Lenders’ rights For example, senior secured or
Slide 19: Our In-Depth Credit Research Process: High Yield Debt Examples
OUR IN-DEPTH CREDIT RESEARCH PROCESS SEEKS TO IDENTIFY QUALITY ISSUERS HIGH YIELD DEBT EXAMPLES Issuers: Australian Technology Innovators Pty Limited, Issuers: Mineral Resources Limited the parent holding company of InfoTrack and • Leading diversified mining services Leap Legal Software company • Bo
Slide 20: Investment Grade Debt Example: Singtel Optus
OUR IN-DEPTH CREDIT RESEARCH PROCESS SEEKS TO IDENTIFY QUALITY ISSUERS INVESTMENT GRADE DEBT EXAMPLE Singtel Optus Finance 2.5% 1-July-2030 • In late June 2020, we participated in the issuance of the Singtel Optus Asset swap spread (mid) 10-year note at 2.5675% s.a. (Semi-Quarterly ASW + 170bps). 17
Slide 21: Portfolio Composition
PORTFOLIO COMPOSITION INVESTING IN A DIVERSIFIED POOL OF ASSETS Seniority of assets Sector allocation Credit rating of assets 5.4% 1.9% 1.4% 1.2% 2.1% 1.7% 2.1% 10.3% 0.9% 4.0% 6.2% 38.4% 27.3% 6.5% 53.8% 67.3% 9.9% 37.9% 12.0% Senior debt 9.7% Subordinated debt Corporate RMBS Bank AA and above A De
Slide 22: Portfolio Composition: Australian-Centric Portfolio
PORTFOLIO COMPOSITION AUSTRALIAN-CENTRIC PORTFOLIO Currency breakdown Domicile of Issuer 2.1% 1.0% 0.5% 9.5% 4.4% 2.1% 3.7% Australia North America AUD Europe (including UK) USD Asia Cash Other Cash 88.4% 88.3% As at 31 August 2020, foreign currency exposures were hedged to Australian dollar floatin
Slide 23: Investment Portfolio Performance
INVESTMENT PORTFOLIO PERFORMANCE AS AT 31 AUGUST 2020 1 MTH 3 MTHS 6 MTHS 1 YR 3 YRS P.A. 5 YRS P.A. SINCE INCEP P.A. PCI Investment Portfolio1 Returns net of operating expenses 0.8% 2.9% -0.7% 1.2% - - 1.7% RBA Cash Rate 0.0% 0.0% 0.1% 0.5% - - 0.7% Excess Returns 0.8% 2.9% -0.8% 0.7% - - 1.0% Dist
Slide 24: Active Management to Find Relative Value Opportunities
ACTIVE MANAGEMENT TO FIND RELATIVE VALUE OPPORTUNITIES FOCUS ON IDENTIFYING QUALITY ISSUERS AND STRONG RUNNING YIELD • We do not anticipate a fast recovery in markets and expect the shakeout of company balance sheets and profitability to continue, particularly as central bank intervention and fiscal
Slide 25: Summary
SUMMARY • PCI’s investment objective is to provide monthly income and we have been delivering on this objective since inception. • PCI’s investment strategy provides flexibility and a breadth of opportunity as we can invest across the full spectrum of credit and fixed income assets including those n
Slide 26: Continuing to Keep Investors Informed
CONTINUING TO KEEP INVESTORS INFORMED AVAILABLE ON THE COMPANY WEBSITE Monthly Investment View daily NTA Reports announcements Latest insights from the Resources and educational www.perpetual.com.au/income Manager information 26
Slide 27: Questions
QUESTIONS