Pengana proposes LIC restructure to create | Australian Markets

Pengana Capital Group has made its intentions recognized to mix its international equities and international personal credit experience beneath the banner of its listed investment company (LIC), Pengana International Equities Fund (PIA).

The restructure proposal will see the portfolio publicity shift to roughly 70 per cent listed international equities and roughly 30 per cent in “highly rated” international personal credit, because the transfer seeks to goal a 56 per cent increase to PIA’s totally franked dividends.

The firm mentioned it expects PIA’s totally franked dividends would rise to 8.4 cents per share, equal to a complete dividend yield of 8.9 per cent primarily based on the 31 July share price of $1.255, with dividend funds to be modified to month-to-month as an alternative of quarterly.

The new international personal credit portion of the portfolio can be managed by Pengana’s in-house credit specialist with Mercer as investment marketing consultant, dipping into US and European personal credit managers with long time period observe data and complete publicity to more than 3,500 underlying mid-market company loans.

Russel Pillemer, CEO at Pengana Capital Group, mentioned the endeavour was a “first for the LIC sector” and brings to market a “hybrid-like income alternative” for buyers.

“This could be considered a new type of hybrid, which takes the opportunity to enhance fully franked dividend returns with global private credit,” he mentioned.

“Equities and international personal credit can complement one another completely, with international personal credit including an important unlisted investment part to the offering, which permits us to enhance the income returns obtainable to PIA shareholders.

“The yield from international personal credit is uncorrelated to any modifications in native rates of interest, which can be enticing to buyers in search of stability in yield, and even more so in a lowering rate of interest surroundings.

“We can offer this advantage due to the closed-end nature of the LIC structure, which enables efficient investments into illiquid asset classes such as global private credit.”

Pengana confirmed PIA’s foray into international personal credit can be financially backed by a “relatively low-cost secured revolving debt facility over the global equity portfolio” with the overarching firm to “cover the shortfall, should the returns from the global credit portfolio be insufficient to meet the cost of the debt facility”.

“More Australians are exiting accumulation and entering transition-to-retirement, and need investments with strong capital preservation characteristics,” Pillemer mentioned.

“There can be a growing need for hybrid buyers to discover a dependable and significant substitute for his or her investments. Many conventional Australian dividend and income sources are uncovered to related financial forces. This lack of diversification means they’ll all fall in worth on the identical time.

“PIA plans to address these issues via global private credit, which is defensive in nature and provides a significant boost to income returns, that can also be reinvested for compounding benefits.”

The firm mentioned these “unprecedented” modifications can be proposed to PIA shareholders at its Annual General Meeting on 10 October.