Perpetual Limited · ASX:PPT
Perpetual — Perpetual Credit Income Trust — Investor Presentation (May 2020)
25 slides from Perpetual's investor presentation, May 2020
Slide 1: Perpetual Credit Income Trust
PERPETUAL CREDIT INCOME TRUST May 2020
Slide 2: Important Note
IMPORTANT NOTE This presentation has been prepared by Perpetual Investment Management Limited ABN 18 000 866 535 AFSL 234426 (PIML or Perpetual Investments) and issued by Perpetual Trust Services Limited ABN 48 000 142 049 AFSL 236648 (PTSL). PTSL is the responsible entity and issuer of the Perpetua
Slide 3: Portfolio Managers and Agenda
PORTFOLIO MANAGERS AGENDA │ Market Update MICHAEL KORBER Head of Credit & Fixed Income │ Portfolio Update Portfolio Manager: Perpetual Credit Income Trust Perpetual Pure Credit Alpha │ High Yield Update 38 years experience, 15 years at Perpetual │ Questions ANNE MOAL Senior High Yield Analyst Portfo
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: Market Update
MARKET UPDATE Perpenayp
Slide 6: Credit Markets – A Longer Term Perspective
CREDIT MARKETS – A LONGER TERM PERSPECTIVE THE CYCLICALITY OF CREDIT OFFERS OPPORTUNITIES • The credit market shows cyclicality over time. • Credit spreads represent the risk premium added to a base interest rate (i.e. bank bills) when pricing corporate securities. • Credit spreads are now wider to
Slide 7: Corporate Credit Has Not Retraced As Quickly As Banks
CORPORATE CREDIT HAS NOT RETRACED AS QUICKLY AS BANKS OPPORTUNITIES CONTINUE TO EMERGE AT ATTRACTIVE RATES OF RETURN An Australian Credit Perspective: iTraxx and Corporate Credit • Credit spreads have retraced from wider marks substantially since March but not uniformly across all securities/sectors
Slide 8: Forward Returns Look Attractive
FORWARD RETURNS LOOK ATTRACTIVE CREDIT SPREAD CONTINUES TO GROW DESPITE CASH RATES FALLING PCI portfolio yield and credit spreads 5 4.5 4 • Increasing uncertainty around the outlook for 3.5 dividend income from shares means investors 3 may be looking for other sources of income. 2.5 • Fixed income s
Slide 9: Portfolio Update
PORTFOLIO UPDATE Perpenayp
Slide 10: PCI Portfolio Was Resilient Though Not Immune to Market Volatility
PCI PORTFOLIO WAS RESILIENT THOUGH NOT IMMUNE TO MARKET VOLATILITY • Credit spread widening was the key detractor of performance over recent months: − March saw the most significant widening in credit spreads since the Global Financial Crisis − Key sectors impacted by credit spread widening have bee
Slide 11: PCI Unit Price to Net Tangible Assets (NTA)
PCI UNIT PRICE TO NET TANGIBLE ASSETS (NTA) DESPITE MARKET VOLATILITY, NTA HAS SEEN A SMALL DECLINE $1.30 Prior to 29 Feb 2020, PCI was trading at an average premium to NTA of 2.83% $1.20 $1.10 $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 May 2019 Jun 2019 Jul 2019 Aug 2019 Sep 2019 Oct 2019 Nov 2019 Dec 201
Slide 12: Flexible Investment Strategy
FLEXIBLE INVESTMENT STRATEGY DEFENSIVELY POSITIONED WITH THE AIM OF PRESERVING CAPITAL • Flexible investment strategy means we can actively move within the broad range of credit and fixed income assets to adapt to changing market conditions − Permits diversification across asset type, credit quality
Slide 13: Dynamic Investment Strategy and a Broad Mandate
DYNAMIC INVESTMENT STRATEGY AND A BROAD MANDATE DIVERSIFICATION ACROSS ASSET TYPE, CREDIT QUALITY, MATURITIES, COUNTRIES AND ISSUERS Issued by property trusts Issued by financial Corporate bonds and floating rate notes Issued by banks and infrastructure corporations groups Non-investment grade Inves
Slide 14: Active Management to Find Relative Value Opportunities
ACTIVE MANAGEMENT TO FIND RELATIVE VALUE OPPORTUNITIES FOCUS ON QUALITY OF ISSUERS AND STRONG RUNNING YIELD • Strong running yield 4.5%. • PCI continues to collect income and strong running yield from issuers (non-financial corporates, domestic banks and RMBS/ABS) which assists in offsetting widenin
Slide 15: Portfolio Is Predominantly Australia-Centric
PORTFOLIO IS PREDOMINANTLY AUSTRALIA-CENTRIC AS AT 30 APRIL 2020 Currency breakdown Sector allocation Geographic breakdown 1.6% 1.6% 1.0% 6.8% 1.5% 1.0% 6.3% 1.0% 2.0% 0.3% 5.9% 4.1% 45.5% 7.6% 10.1% 92.8% 86.7% 11.0% 13.4% AUD USD Cash Australia North America Europe (including UK) Asia Corporate Ba
Slide 16: Portfolio Composition Remains Largely Unchanged
PORTFOLIO COMPOSITION REMAINS LARGELY UNCHANGED RISK AWARE INVESTMENT REMAINS A FOCUS 31-Jan-20 Credit ratings of assets 29-Feb-20 Seniority of assets 31-Mar-20 70% 30-Apr-20 50% 60% 45% 50% 40% 35% 40% 30% 25% 30% 20% 15% 20% 10% 10% 5% 0% 0% AA and A BBB BB+ and unrated Cash Senior debt Subordinat
Slide 17: High Yield Update
HIGH YIELD UPDATE Perpenayp
Slide 18: Investments in High Yield and Loans
INVESTMENTS IN HIGH YIELD AND LOANS DESIGNED TO PROVIDE ATTRACTIVE RETURNS WITH WELL MANAGED RISKS Typical capital structure of a company FIRST Core investment SENIOR SECURED DEBT We are looking for assets that provide: Bank loans, first lien and bonds universe High coupons SUBORDINATED SECURED DE
Slide 19: High Yield & Loan Specialist: Credit Research Process
HIGH YIELD & LOAN SPECIALIST DISCIPLINED, PROVEN CREDIT RESEARCH PROCESS Our approach for each investment is to undertake extensive, fundamental and robust research to screen issuers for acceptable credit quality: Capital In-depth financial Understanding of Valuation of Board and Legal structure ana
Slide 20: PCI High Yield Investments
PCI HIGH YIELD INVESTMENTS INVESTMENTS HAVE BEEN RESILIENT AND DELIVERING INCOME • 41.2% of the portfolio is non-investment grade including: − 16.5% in corporate loans, predominantly senior secured − 16.0% in sub-investment grade or unrated corporate bonds, mainly senior secured or unsecured − remai
Slide 21: High Yield Market and Opportunities
HIGH YIELD MARKET AND OPPORTUNITIES HIGH YIELD CREDIT SPREADS HAVE WIDENED • High yield credit spreads have widened materially, especially in offshore markets where there are a number of issuers directly affected by COVID-19 or the oil price collapse. • Low primary Australian high yield issuance: −
Slide 22: Key Performance Data
KEY PERFORMANCE DATA AS AT 30 APRIL 2020 • Provided monthly income since inception totalling 3.74 cents per unit. • Annualised financial year to date distribution rate is 3.81%1 which is in line with target return2 objective of RBA cash rate + 3.25% (net of fees) through the economic cycle. 1 Based
Slide 23: Summary
SUMMARY • PCI represents a well-diversified portfolio of credit and fixed income assets with a current running yield of 4.5%1. • We believe the underlying assets are performing well and further opportunities have emerged with recent market volatility. • The full value of the portfolio’s assets is re
Slide 24: Continuing to Keep Investors Informed
CONTINUING TO KEEP INVESTORS INFORMED AVAILABLE ON THE COMPANY WEBSITE Monthly View daily Latest insights investment NTA from reports announcements the Manager www.perpetual.com.au/income 24
Slide 25: Thank You
NATHAN BOROUGHS THANK YOU NSW and ACT State Manager +61 466 775 961 nathan.boroughs@perpetual.com.au Contact your local Perpetual Investments TIM MCCALLUM State Manager WA State Manager +61 411 209 403 tim.mccallum@perpetual.com.au DANIEL MOORE VIC/SA/NT/TAS State Manager +61 400 032 819 daniel.moor
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