M&g Credit Inc. Regulatory News (MGCI)

M&G Credit Income: New research

15/03/19

· M&G Credit Income Investment Trust launched in November 2018 and targets a dividend yield of LIBOR plus 4% per annum...

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M&G Credit Income Investment Trust launched in November 2018 and targets a dividend yield of LIBOR plus 4% per annum once fully invested. The trust offers investors access to illiquid and private debt markets, usually only the preserve of institutional investors, which offer attractive yields for taking extra liquidity and complexity risk.

At all times, the managers have committed to ensure that at least 70% of the investments will be investment grade. Their aim is that the trust will offer the yield of a high yield fund, but with the credit risk of an investment grade fund. With the economy in a late cycle phase, the lower level of credit risk could prove attractive as time goes on. At the same time, most of the investments are expected to be floating rate, offering protection from rising interest rates, and the duration will be low (currently around two years).

Since launch the trust has made good progress on getting invested. In line with the stated strategy, it has so far invested largely in liquid public securities which will serve as liquidity to invest in private, less liquid opportunities as they come up. The dividend level in the first accounting period is planned to be LIBOR plus 2.5%, payable in two instalments, with the trust moving to quarterly dividends and a LIBOR plus 4% payout from 2020 onwards.

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