Perpetual Limited · ASX:PPT
Perpetual — Perpetual Credit Income Trust — Investor Presentation (July 2021)
26 slides from Perpetual's investor presentation, Jul 28, 2021
Slide 1: Perpetual Credit Income Trust Investor Presentation
PERPETUAL CREDIT INCOME TRUST INVESTOR PRESENTATION 28 July 2021
Slide 2: Important Note
IMPORTANT NOTE This presentation has been prepared and authorised for release 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) i
Slide 3: Your Presenters and Agenda
YOUR PRESENTERS AGENDA JAMES HOLT Director, Investment Solutions │ Perpetual Credit Income Trust (PCI) Perpetual Asset Management Australia portfolio update │ Q&A MICHAEL KORBER Managing Director, Credit & Fixed Income Portfolio Manager Perpetual Credit Income Trust ANNE MOAL Head of Corporate High
Slide 4: Key Principles of Investing in Credit/Fixed Income
KEY PRINCIPLES OF INVESTING IN CREDIT/FIXED INCOME • Aims to provide a source of regular, reliable income • Floating rate credit* can offer regular income and protection against rising bond yields • Diversification is key to managing risk and maximising opportunities • Active management is important
Slide 5: A Robust, Active and Risk Aware Investment Process
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 6: Portfolio Construction
PORTFOLIO CONSTRUCTION A ROBUST, ACTIVE AND RISK AWARE INVESTMENT PROCESS SOURCES OF INCOME PCI primarily generates its income and running yield from coupon payments received from corporate bonds and asset backed Portfolio summary securities and interest income from investment in loans. As at 30 Jun
Slide 7: Broad Investment Universe Designed to Provide Multiple Sources of Return
PERPETUAL CREDIT INCOME TRUST (PCI) BROAD INVESTMENT UNIVERSE DESIGNED TO PROVIDE MULTIPLE SOURCES OF RETURN “Identify sources of predictable and “Active trading” reliable income” • Income from realised capital gains How we seek to • Running yield is supported by coupon through trading securities ge
Slide 8: Portfolio Composition
PORTFOLIO COMPOSITION OUR ACTIVE MANAGEMENT AIMS TO DELIVER A DIVERSIFIED PORTFOLIO Sector allocation Breakdown by corporate sector • Our fundamental research process is designed to identify attractive issuers 1.7% 0.7% Banks, 0.7% Chemicals, 2.0% 3.8% 1.7% Commercial Services, 2.2% and assets on a
Slide 9: Portfolio Composition as at June 2021
PORTFOLIO COMPOSITION AS AT 30 JUNE 2021 2.0% 5.8% 3.8% 9.8% AA and above Senior debt A Subordinated debt Breakdown 35.3% BBB Breakdown by credit Deeply subordinated by seniority 27.7% rating 41.5% BB+ and lower debt Unrated 62.5% Cash 11.7% 0.7% 3.8% 3.7% 3.8% Australia 2.2% 10.1% North America AUD
Slide 10: Portfolio Composition: Assets in the Portfolio
PORTFOLIO COMPOSITION ASSETS IN THE PORTFOLIO INVESTMENT GRADE1 SUB INVESTMENT GRADE2 UNRATED ASSETS3 Types of assets include corporate bonds, private loans, asset backed securities (ABS), hybrid securities and convertibles. 1 An investment grade asset has a long term rating of BBB- to AAA for Stand
Slide 11: Case Study – Wesfarmers
CASE STUDY – WESFARMERS INVESTMENT GRADE DEBT EXAMPLE • Wesfarmers $1 billion deal – we participated in the 10 year tranche Wesfarmers 2.55% 23-Jun-2031 (AUD) Bond of $350 million in June 2021 $104 98.0 97.5 Capital price Asset swap spread in bps (RHS) • Opportunity $104 97.0 o Quality issuer – Wesf
Slide 12: Case Study – Lendlease
CASE STUDY – LENDLEASE INVESTMENT GRADE DEBT EXAMPLE • Lendlease Group’s* $300 million deal – PCI participated in the Lendlease 3.70% 31-Mar-2031 (AUD) Bond Australian dollar denominated 10 year green bond in March $109 205.0 2021 Capital price Asset swap spread in bps (RHS) $108 200.0 Entry via pri
Slide 13: Case Study – APM Employment Services
CASE STUDY – APM EMPLOYMENT SERVICES HIGH YIELD ASSET EXAMPLE COMPANY • Provides employment, health and human services supporting government programs to place people into meaningful and lasting employment • Social purpose of helping people with disabilities, injury or illness in the workplace ASSET
Slide 14: Case Study – Omni Bridgeway
CASE STUDY – OMNI BRIDGEWAY HIGH YIELD ASSET EXAMPLE COMPANY • ASX listed company • Specialist fund manager that provides litigation funding and support services to insolvency and legal practitioners ASSET FEATURES • Sector – financial services • Type – bond and floating rate notes (listed and unlis
Slide 15: Our Views on Current Market Conditions
OUR VIEWS ON CURRENT MARKET CONDITIONS • Credit outlook for markets o Our credit score as at 30 June 2021 was +4 which indicates a positive outlook over the short to medium term. o Financial markets have risen on the back of strong economic growth expectations, supportive monetary and fiscal policy
Slide 16: Opportunities We See for the PCI Portfolio
OPPORTUNITIES WE SEE FOR THE PCI PORTFOLIO • Securitisation market o In a persistent low yield environment, we find the securitisation market offers competitive relative value. o Securitised assets have supported the portfolio’s running yield through receipt of income and contributed to credit sprea
Slide 17: Key Performance Data – Investment Performance
KEY PERFORMANCE DATA AS AT 30 JUNE 2021 INVESTMENT PERFORMANCE 1 MTH 3 MTHS 6 MTHS 1 YR 3 YRS P.A. 5 YRS P.A. SINCE INCEP P.A. PCI Investment Portfolio1 0.4% 1.5% 3.1% 8.3% - - 4.0% Returns net of operating expenses RBA Cash Rate 0.0% 0.0% 0.0% 0.1% - - 0.5% Excess Returns 0.4% 1.4% 3.1% 8.2% - - 3.
Slide 18: Key Performance Data – Total Unitholder Return
KEY PERFORMANCE DATA AS AT 30 JUNE 2021 TOTAL UNITHOLDER RETURN 1 MTH 3 MTHS 6 MTHS 1 YR 3 YRS P.A. 5 YRS P.A. SINCE INCEP P.A. Total unitholder return 1.3% 0.9% 1.3% 12.8% - - 0.7% RBA Cash Rate 0.0% 0.0% 0.0% 0.1% - - 0.0% • ASX unit price has recovered Excess Returns 1.3% 0.9% 1.3% 12.7% - - 0.7%
Slide 19: Summary of PCI
SUMMARY OF PCI SOURCE OF INCOME Providing monthly income with an annual distribution return of 3.5%1 which is in line with PCI’s target return of RBA Cash Rate + 3.25% (net of fees) through the economic cycle2. DEFENSIVE CHARACTERISTICS We believe that credit and fixed income assets should be the be
Slide 20: Continuing to Keep Investors Informed
CONTINUING TO KEEP INVESTORS INFORMED VISIT OUR WEBSITE Monthly Investment Reports View daily NTA announcements Latest insights from the Resources and educational www.perpetual.com.au/income Manager information 20
Slide 21: Q&A
Q&A
Slide 22: Appendix
APPENDIX Perpenayp
Slide 23: 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 24: 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 25: 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 26: 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 Cash, 1.1% Mortgage Securities, 8.76% Software & Services, 7.76% Non-investment grade (Sub-investment grade Metals & Mining, 5.82%
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