M&G’s new Credit Income trust IPO falls short of target

By Daniel Lanyon on Tuesday 13 November 2018

Editor's PickAlternative Lending

The new closed ended fund, also known as an investment trust, will invest across public and private credit markets.

Asset management giant M&G has launched a new investment trust aimed at offering private credit and debt exposure to investors but has fallen short of a £250m target Initial Public Offering, raising £100m instead.

The fund will have an unconstrained investment approach and will potentially hold exposure to asset-backed securities backed by a pool of loans, credit card receivables, auto loans, student loans, commercial loans and corporate loans; commercial mortgages; direct lending to small and mid-sized companies, including lease finance and receivables financing; distressed debt, infrastructure debt, leveraged loans to private equity as well as corporate and government bonds

The portfolio will be made up of around 50 investments, mostly be in Sterling denominated Debt Instruments.  It can invest up to 30 per cent of Gross Assets in below investment grade Debt, those instruments rated below BBB- by S&P or Fitch or Baa3 by Moody’s or, in the case of unrated holdings, those which have an internal M&G rating below BBB-.

Over the longer term, M&G said, it is expected that the fund will be mainly invested in private debt assets and will target an annualised dividend yield of LIBOR plus 2.5 per cent on the issue price in the first year to 31 December 2019 and LIBOR plus 4 per cent thereafter. Key individuals will include Jeremy Richards as lead Fund Manager, Adam English, fund Manager and William Nicoll, Co-Head of Alternative Credit - all at M&G Investments.

Richards said: "The Company offers our 20 years of investment experience in private credit to a wider audience than ever before. Private credit can provide investors with an attractive level of yield and security within the fixed income universe and is playing an increasingly prominent role for companies seeking finance."

Directors include David Simpson, Richard Boleat, Mark Hutchinson and Barbara Powley, while Prudential Assurance holds 25 per cent of the Ordinary Shares.

M&G, the largest private credit investor in Europe and second largest in the world, was acquired by Prudential in 1999. It is one of the longest established asset managers in Europe, managing c.£286bn as at 30 June 2018. It has particular expertise in fixed income with c.£188bn under management as at 30 June 2018 split c.£151bn in public and c.£37bn in private credit.

The fund's ticker will be 'MGCI'.

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