Income focused strategies in vogue
Below we take a look at the key news items and announcements in the new year, which include more capital raisings from fixed income LITs, new investments from BTI, LIC consolidation and investment team changes at Platinum.
Income Focused Strategies in Vogue
There is a clear trend with the strategies that are being launched through LICs and LITs in recent times and that is “income”. In December 2024, Whitefield Income Limited (ASX: WHI) commenced trading while the MA Credit Income Trust (ASX: MA1) is expected to commence trading in March with Realm Investment House also looking to bring the Dominion Income Trust 1 (ASX: DN1) to market. All of these strategies seek to deliver an enhanced income, whether it be through the use of debt or equity to deliver the income objectives. These listings follow the launch of the Metrics Real Estate Multi-Strategy Fund (ASX: MRE) and the Perpetual Global Private Credit Trust (ASX: PCX) last year. We expect more income focused strategies to come to market this year with investors looking for strategies to deliver an enhanced income stream.
The thirst for income products has been evident over the last 18 months. As is highlighted by the below chart, there has been a significant shift in demand for fixed income LITs with this category bucking the trend and trading at a premium on a market cap weighted basis. This compares to the broader LIC/LIT market which has seen discounts widen. Equity portfolios with an enhanced income mandate that deliver monthly dividends, such as PL8 and WHI, have also been well bid with both LICs trading at premiums at 31 January 2025.
Perpetual Rejects KKR Offer
In February, Perpetual Limited (ASX: PPT) terminated the Scheme Implementation Deed with KKR after the Board withdrew its recommendation in favour of the Scheme for the sale of the Wealth Management business. The Company will continue executing on the business separation program to establish standalone and more autonomous businesses, as well as implementing a new operating model for Asset Management and delivering on an improved cost reduction program. In parallel with the business separation program, the Board has also determined to continue to pursue a sale of the Wealth Management business. Proceeds from the sale would be used to strengthen the Group’s capital position as well as support investment in growth of the remaining businesses.
As it currently stands there is expected to be no impact on the investment teams for the LMI’s managed by Perpetual, however we will be keeping an eye on the impact of the cost and capital management initiatives on the teams and available resources.
Future Generation Appoints CIO
On 18 February 2025, Future Generation announced the appointment of Lee Hopperton as Chief Investment Officer. Mr. Hopperton has over 25 years’ experience in the investment industry, having held senior roles at JP Morgan Chase, Macquarie, Auscap Asset Management and most recently Head of Private Wealth at Perpetual Asset Management.
Mr. Hopperton will provide advice to the Future Generation Investment Committees and will seek to expand the group’s reach within the investment community. Mr. Hopperton will work with the CEO, Caroline Gurney, to help promote the Group’s model and investment strategy to a broader group of network of brokers, financial planners and high net worth investors.
There are currently three Future Generation funds - Future Generation Australia (ASX: FGX), Future Generation Global (ASX: FGG) and Future Generation Women (unlisted), with $1.4 billion AUM.
GCI Seeking to Raise up to $209.7m through Entitlement Offer
On 24 February 2025, Gryphon Capital Income Trust (ASX: GCI) announced a 1-for-4 Entitlement Offer. New units issued under the Offer will be issued at $2.00 per unit with the Trust seeking to raise up to $209.7 million. Any units under the Entitlement Offer not subscribed to will be offered to wholesale investors under a Shortfall Offer. The Entitlement Offer is scheduled to close on 25 March 2025 with new units to commence trading on 7 April 2025.
Capital raised will be used to participate in the pipeline of investment opportunities available to the Trust due to the significant amount of RMBS and ABS issuance. In addition to increasing the size and diversification of the portfolio, the increased number of units issued by the Trust is expected to have a positive impact on liquidity for investors.
BTI Make an Investment in PropHero
During the month, Bailador Technology Investments Limited (ASX: BTI) made a $12.5 million investment in PropHero, an AI-enabled property investment platform that helps individuals source, purchase and manage investment properties. PropHero uses AI models to aggregate data and provide tailored investment property advice that aligns with an individual’s budget and goals. The business has a presence in four countries, including Australia, Spain, Indonesia and Ireland and has served over 2,000 customers since its establishment in 2021.
The investment by BTI was part of a $25 million funding round with the capital raised to be used to accelerate investment in product development, expand the marketplace partner network, and support continued international expansion. David Kirk will be joining the Board as part of the investment.
BTI continues to be highly active in the market, using capital received from other investments to deploy in new opportunities. Prior to the investment in PropHero, the Company had $39.4 million cash providing scope for further investments.
SNC Makes First Quarterly Dividend Payment
Sandon Capital Investments Limited (ASX: SNC) has made its first quarterly dividend payment after announcing an increase in the frequency of dividends from semi-annual to quarterly last year. The Company announced a quarterly dividend of 1.4 cents per share, fully franked, to be paid on 7 March 2025. The quarterly dividend represents an annual rate of 5.6 cents per share, an increase on the previous annual dividend of 5.5 cents per share.
The Company has 38.1 cents per share in profit reserves and a franking balance of 7.6 cents per share, providing the Company with the capacity to pay fully franked dividends of 22.8 cents per share without the accumulation of further franking credits or profit reserves. This represents more than 4 years of fully franked dividend coverage at an annual dividend rate of 5.6 cents per share and represents an attractive grossed-up dividend yield.
QRI Raises $218 million through Entitlement Offer & Placement
On 12 February 2025, Qualitas Real Estate Income Fund (ASX: QRI) announced a Non-Renounceable Entitlement Offer and Shortfall Offer to raise up to $151 million. The Entitlement Offer is on a 1-for-5 basis with an offer price of $1.60 per unit. The Entitlement Offer included an oversubscription facility with any new units not subscribed under the Entitlement Offer offered to wholesale investors.
The Entitlement Offer closed on 3 March 2025 with new units issued under the Offer to commence trading on 13 March 2025. The Offer was fully subscribed with the majority of the new units being issued under the Shortfall Offer.
In addition to the Entitlement & Shortfall Offer the Trust has conducted a Placement for which it has received binding commitments for approximately $66.9 million at a price of $1.60 per unit.
The combined capital raising offers will result in the issue of ~136 million new units and take the market cap of the Trust to just shy of $1 billion. The demand from the market reiterated the continued demand for alternative fixed income products.
PGF Seeks to Acquire PMC and PAI
On 27 February 2025, PM Capital Global Opportunities Fund Limited (ASX: PGF) confirmed it had made non-binding proposals to acquire 100% of Platinum Capital Limited (ASX: PMC) and Platinum Asia Investments Limited (ASX: PAI). The takeover offer comes as PMC and PAI move forward with the Scheme to convert the shares of the two companies to units in the relevant ETMFs.
Under the proposal, PGF is offering to overpay for the assets. PGF is proposing to offer PMC and PAI shareholders a 1.5% premium to the pre-tax NTA for those that take PGF scrip with the option to receive cash consideration equal to the post-tax NTA. The investment manager of PGF, PM Capital, has agreed to fund the 1.5% premium as well as the transaction costs, subject to an overall cap.
The Offer will certainly give the Board and shareholders something to think about. At the time of the Offer, the PGF share price resulted in the scrip conversion providing a material upside for PMC and PAI shareholders, however the PGF share price has declined to a level around the value of the Offer. If we assume the PGF share price trades at the Offer level, this would represent an upside of 8.0% for PMC shareholders based on the share price as at 4 March 2025 and 10.1% upside to PAI shareholders.
Investment Team Changes at Platinum
Platinum Asset Management (PTM) have announced some material changes to the investment team which took effect on 3 March 2025. Of note, Andrew Clifford and Clay Smolinski have stepped down from their global portfolio management responsibilities and Co-Chief Investment Officer roles. Ted Alexander has joined the team and will take over the Portfolio Manager responsibilities for the global strategies, which includes management of the PMC portfolio. Ted has 17 years’ experience in the investment industry. He has held a number of roles within the industry including CIO at BML Funds, Head of Investments at Orca, Portfolio Manager and Head of Healthcare at Magellan Financial Group and Head of Alternative Investments, Technology and Telecom at Neptune Investment Management.
To support the transition, Andrew Clifford has assumed an investment mentorship role on the Investment Oversight Group (IOG). James Simpson, a Board member of PTM, is also taking on an executive role within PTM and will Chair the IOG.
Clay Smolinski is taking a six month leave of absence. There is potential for Clay to return in an alternative role within the investment team but in IIR’s opinion this would be unlikely.
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The views here are not recommendations and should not be considered as investment advice.
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