Perpetual Limited · ASX:PPT
Perpetual — Perpetual Credit Income Trust — Investor Presentation (March 2021)
31 slides from Perpetual's investor presentation, Mar 5, 2021
Slide 1: Perpetual Credit Income Trust Investor Presentation
PERPETUAL CREDIT INCOME TRUST INVESTOR PRESENTATION 5 March 2021
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: Agenda
AGENDA │ Perpetual Credit Income Trust (PCI) portfolio update │ The case for high yield and the Perpetual Loan Fund │ Asset valuation 3
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: Portfolio Construction
PORTFOLIO CONSTRUCTION A ROBUST, ACTIVE AND RISK AWARE INVESTMENT PROCESS DIVERSIFICATION We believe the portfolio is well diversified in respect of both the number and broad spectrum of credit and fixed income assets Portfolio summary included in the portfolio. As at 31 January 2021 Amount SOURCES
Slide 7: An Australian Focused Portfolio
AN AUSTRALIAN FOCUSED PORTFOLIO UNDERPINNED BY STRONG IN-DEPTH, BOTTOM UP RESEARCH • We have a flexible investment strategy that allows Domicile of Issuer Currency breakdown investment in credit and fixed income assets diversified by asset type, credit quality, issuers and 1.1% 4.4% 0.6% 1.1% 10.9%
Slide 8: Portfolio Composition
PORTFOLIO COMPOSITION OUR ACTIVE MANAGEMENT AIMS TO DELIVER A DIVERSIFIED PORTFOLIO • Our active approach means our diversified Credit rating of assets Seniority of assets portfolio of investments is continually assessed, 2.6% 7.5% and actively traded, in favour of credit and fixed 1.1% 9.5% income
Slide 9: Portfolio Composition
PORTFOLIO COMPOSITION OUR ACTIVE MANAGEMENT AIMS TO DELIVER A DIVERSIFIED PORTFOLIO Sector allocation Breakdown by corporate sector • Our fundamental research process is Consumer Services, Educational Services, 2.2% 1.7% 2.0% 0.8% 4.3% 0.7% designed to identify attractive issuers 1.1% Airlines, 2.3%
Slide 10: Portfolio Composition: Credit Quality of Assets
PORTFOLIO COMPOSITION CREDIT QUALITY OF ASSETS • An investment grade asset has a long term rating of BBB- to AAA for Standard & Poor’s (S&P) and Fitch or Baa3 to Aaa for Moody’s. The highest rating is AAA/Aaa which indicates that the issuer of the debt asset has extremely strong capacity to meet its
Slide 11: Portfolio Update: Contributors to Performance
PORTFOLIO UPDATE CONTRIBUTORS TO PERFORMANCE Understanding credit spreads Performance • Investment performance is generally attributed to the • The PCI portfolio has returned 4.5%1 over the 6 months Manager’s selection of assets for the portfolio and the to 31 January 2021 with credit spread tighten
Slide 12: Portfolio Update: Market Conditions Provided the Ultimate Test of Resilience
PORTFOLIO UPDATE MARKET CONDITIONS PROVIDED THE ULTIMATE TEST OF RESILIENCE During the COVID-19 led volatility: • Investment grade (IG) assets dominated trading o This reflected the support from central banks towards IG credits as well as access to equity for many ASX listed issuers to strengthen th
Slide 13: Portfolio Update: Outlook
PORTFOLIO UPDATE OUTLOOK • The Investment Team have a proprietary credit scoring process that assesses the factors that are likely to cause changes in the outlook of credit markets. Typical ranges for a credit score are from -4 to +4. o As at 31 January 2021, our credit score was +4 which indicates
Slide 14: PCI – ASX Unit Price to Net Tangible Assets (NTA)
PCI – ASX UNIT PRICE TO NET TANGIBLE ASSETS (NTA) $1.30 $1.20 • Market conditions provided the ultimate test of resilience for the $1.10 PCI portfolio since listing on the ASX in 2019. $1.00 • Prior to the COVID-led market $0.90 volatility, PCI was trading at an $0.80 average premium to NTA of 2.8%.
Slide 15: PCI's Income Focus
PCI’S INCOME FOCUS MAY BE ATTRACTIVE PARTICULARLY AS INVESTORS SEARCH FOR YIELD IN A LOW INTEREST RATE ENVIRONMENT • PCI continues to meet its investment objective of providing investors with monthly income by investing in a diversified pool of credit and fixed income assets. • The table below1 show
Slide 16: Investment Portfolio Performance
INVESTMENT PORTFOLIO PERFORMANCE AS AT 31 JANUARY 2021 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 0.5% 2.8% 4.5% 3.0% - - 3.4% RBA Cash Rate 0.0% 0.0% 0.0% 0.2% - - 0.6% Excess Returns 0.5% 2.8% 4.5% 2.8% - - 2.9% Distr
Slide 17: The Case for High Yield
THE CASE FOR HIGH YIELD Perpenayp
Slide 18: Investment in High Yield and Loans
INVESTMENT IN HIGH YIELD AND LOANS DESIGNED TO PROVIDE ATTRACTIVE RETURNS WITH WELL MANAGED RISKS • Investment in high yield (unrated or sub-investment grade assets) provides a point of differentiation for PCI’s investment strategy as these assets typically pay higher coupons than investment grade a
Slide 19: Investment in High Yield and Loans: Focus on the Capital Structure
INVESTMENT IN HIGH YIELD AND LOANS FOCUS ON THE CAPITAL STRUCTURE Typical capital structure of a company Why is the capital structure important? Below illustrates how payments in the capital structure are prioritised. • We mainly focus our investments in FIRST Core investment SENIOR SECURED DEBT sub
Slide 20: Investment in High Yield and Loans: Due Diligence Process
INVESTMENT IN HIGH YIELD AND LOANS UNDERTAKING AN EXTENSIVE DUE DILIGENCE PROCESS WHICH AIMS 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 s
Slide 21: High Yield Portfolio Composition
HIGH YIELD PORTFOLIO COMPOSITION DIVERSIFICATION ACROSS CREDIT QUALITY AND SECTORS Credit rating of assets Breakdown of sub investment grade and unrated assets by sector 1.1% Cash Consumer Services, Department Restaurants, 1.5% 6.8% Stores, 2.5% Financial Services, 0.9% Real Estate, 1.0% 46.4% Healt
Slide 22: Investment in High Yield: Examples of Sub-Investment Grade Assets
INVESTMENT IN HIGH YIELD EXAMPLES OF SUB-INVESTMENT GRADE ASSETS Issuer: Australian Technology Innovators Pty Limited, Issuer: Mineral Resources Limited the parent holding company of InfoTrack and • Leading diversified mining services Leap Legal Software company • Both are leading technology innovat
Slide 23: Investment in High Yield: Examples of Unrated Assets
INVESTMENT IN HIGH YIELD EXAMPLES OF UNRATED ASSETS Issuer: Centuria Capital No.2 Fund Issuer: The Citadel Group • Wholly owned subsidiary of Centuria • Enterprise software and services Capital Group (ASX: CNI). company • Specialist investment manager centred • Unlisted around property funds and inv
Slide 24: Investment in High Yield: Perpetual Loan Fund
INVESTMENT IN HIGH YIELD PERPETUAL LOAN FUND • PCI will invest in loans directly, or indirectly through its investment in the Perpetual Loan Fund, to gain exposure to corporate loan investments. Under PCI’s investment strategy, the maximum exposure to the Perpetual Loan Fund is 70% of the portfolio.
Slide 25: Asset Valuation
ASSET VALUATION Perpenayp
Slide 26: Asset Valuation
ASSET VALUATION • The full value of assets in the PCI portfolio is reflected in the estimated Net Tangible Asset (NTA) statement released to the ASX daily, providing investors with transparency as to the portfolio value. • The majority of the assets in the portfolio, including bonds and floating rat
Slide 27: Asset Valuation: Approach of the Loan Valuation Committee
ASSET VALUATION GENERAL APPROACH OF THE LOAN VALUATION COMMITTEE (LVC) • Where external pricing is not available, loans are valued at fair value by the LVC having considered the current economic conditions, recent movements in corporate credit spreads and the risk of credit impairment. • Impairments
Slide 28: Our Valuation Process in Action
OUR VALUATION PROCESS IN ACTION REVISIONS IN 2020 DURING COVID-19 LED MARKET VOLATILITY Loan valuations in the Perpetual Loan Fund from • In April 2020, Perpetual’s LVC reviewed all January 2020 to January 2021 valuations across the loan book to consider any $105 revisions following COVID-led volati
Slide 29: Summary
SUMMARY • PCI’s investment objective is to provide monthly income and we have been delivering on this objective since inception. • The PCI portfolio has returned 4.5%1 over the 6 months to 31 January 2021 and has adapted well across changing market conditions. This includes its resilience over the C
Slide 30: Continuing to Keep Investors Informed
CONTINUING TO KEEP INVESTORS INFORMED AVAILABLE ON THE COMPANY WEBSITE Monthly Investment Reports View daily NTA announcements Latest insights from the Resources and educational www.perpetual.com.au/income Manager information 30
Slide 31: Questions
QUESTIONS
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