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Private credit underpins Metrics listing

Private credit underpins Metrics listing
While stock markets have already recovered, it appears that investors are looking for ways to diversify their portfolios away from traditional stocks and bonds.
Mar 26, 2019 By Simon Herrmann Tags: IPO, MOT

Investors have poured more than $300 million in just nine days into the latest ASX listing of alternative asset manager Metrics, which will offer retail investors exposure to the difficult-to-access private credit market.

Private credit refers to a range of debt instruments whereby lenders offer loans to companies requiring capital, typically negotiated privately and not tradable on exchanges or public capital markets.

The strong demand for the ASX listing follows a period of elevated stock market volatility and subsequent price declines across many equity markets in late 2018. In a similar vein, Perpetual has just announced a new credit income trust
While stock markets have already recovered, it appears that investors are looking for ways to diversify their portfolios away from traditional stocks and bonds.

The newly established Trust, the MCO Income Opportunities Trust, will offer investors access to a portfolio of mostly private credit investments with a strong focus on cash distributions and preserving capital. Manager Metrics Credit Partners promotes the fund as a conservative investment, largely uncorrelated to listed equities or bonds.

The trust has exposure to four different wholesale funds managed by Metrics, which are mostly exposed to loans, notes and bonds with floating as well as fixed interest rates.

In October 2017 Metrics Credit Partners listed the MCP Master Income Trust (ASX:MXT), which achieved net returns of 5.4% during 2018.

While it is correct that lending and credit markets are somewhat uncorrelated from stocks, the complexity of the financial system makes it difficult to draw a clear line between various segments of the market.
Credit and default risks are typically higher in times of market turbulence and I certainly don’t consider this investment as "conservative".

However the asset class offers diversification and income and was previously not accessible for retail investors.
The trust aims to pay a quarterly cash income distribution of 7% - with a total shareholder return of 8-10% net of management fees - which isn’t too far off from the long-term average capital growth return of the Australian stock market.
The strong pre-IPO demand suggests a successful listing in late April with the first distribution targeted in June 2019.

MCP Income Opportunities Trust
Shares on Offer: 150m
Listing Price: $2.00
Pro forma NAV: $2.00 per unit
Listing Date: 29th April

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Simon Herrmann Author: Simon Herrmann Mar 26, 2019

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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