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    PCI   AU0000041261

PERPETUAL CREDIT INCOME TRUST

(PCI)
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Perpetual Credit Income Trust : PCI Monthly Investment Report - December 2021

01/23/2022 | 05:54pm EDT

For personal use only

24 January 2022

ASX Limited

ASX Market Announcements Office

Exchange Centre

20 Bridge Street

SYDNEY NSW 2000

Perpetual Credit Income Trust

Monthly Investment Update announcement

Perpetual Credit Income Trust (the Trust) (ASX: PCI) advises that it has released the Monthly Investment Update (the Report) for the period ending 31 December 2021 (as attached).

If shareholders or other interested parties have any queries regarding the Report, they can contact:

Karen Davis

Senior Manager, Listed Products and Projects

Perpetual Investment Management Limited

P: 02 9229 9114

E: karen.davis@perpetual.com.au

Yours faithfully

Perpetual Trust Services Limited

INVESTMENT UPDATE

December 2021

only

KEY TRUST INFORMATION

2

INVESTMENT OBJECTIVE

To provide investors with monthly income by investing in

AS AT 31 DECEMBER 2021

a diversified pool of credit and fixed income assets.

ASX code:

PCI

PORTFOLIO SNAPSHOT

Structure:

Listed Investment Trust

Listing date:

14 May 2019

Market capitalisation:

$435 million

AS AT 31 DECEMBER 2021

AMOUNT

ASX unit price

$1.085

Units on issue:

400,631,504

Distributions:

Monthly

use

$1.107

NTA per unit¹

Management costs:

0.88% p.a.³

¹ Daily Net Tangible Asset (NTA) is available at

Manager:

Perpetual Investment

www.perpetualincome.com.au

Management Limited

All figures are in Australian dollars (AUD), unless otherwise

st ted. All figures are unaudited and approximate. Past

Responsible Entity:

Perpetual Trust Services

performance is not indicative of future performance. NTA

Limited

figures are calculated as at the end of day on the last business

2 Perpetual Credit Income Trust ARSN 626 053 496.

day of the month.

3 Estimate inclusive of net effect of GST.

4

INVESTMENT PERFORMANCE

AS AT 31 DECEMBER 2021

1 MTH

3 MTHS

6 MTHS

1 YR

3 YRS P.A.

5 YRS P.A.

SINCE INCEP P.A.

PCI Investment portfolio

0.2%

0.3%

1.3%

4.4%

-

-

3.7%

Returns net of operating expenses

RBA Cash Rate

0.0%

0.0%

0.0%

0.0%

-

-

0.4%

Excess returns

0.2%

0.3%

1.2%

4.4%

-

-

3.3%

Distribution return

0.3%

0.9%

1.7%

3.4%

-

-

3.5%

personal

4 Investment returns, net of management costs have been calculated on the growth of Net Tangible Assets (NTA) after taking into account all

o erating expenses (including management costs) and assuming reinvestment of distributions on the ex-date. Distribution return has been calculated based on the PCI investment portfolio return less the growth of NTA. Past performance is not indicative of future performance. Since inception return is from allotment on 8 May 2019. Investment return and index return may not sum to excess return due to rounding.

DISTRIBUTIONS CPU5

The table below shows the distribution in cents per unit for each distribution period in the respective financial year. The annual distribution return is 3.4%. This is in line with the Trust's target return of RBA Cash Rate +3.25% (net of fees) through the economic cycle. This is a target only and may not be achieved.

AS AT 31

For

JUL

AUG

SEP

OCT

NOV

DEC

JAN

FEB

MAR

APR

MAY

JUN

FYTD

DECEMBER

2021

FY2020

0.40

0.40

0.39

0.37

0.36

0.37

0.37

0.35

0.33

0.30

0.31

0.30

4.26

FY2021

0.32

0.32

0.30

0.31

0.28

0.30

0.30

0.27

0.30

0.29

0.33

0.32

3.63

FY2022

0.32

0.32

0.31

0.32

0.31

0.35

-

-

-

-

-

-

1.91

5 Distributions are stated as cents per unit and have been rounded to two decimal places. Detailed distribution announcements are available on the PCI website and are stated in Australian dollars rather than cents per unit. Distribution return has been calculated

based on the PCI investment portfolio return less the growth of NTA. Past performance is not indicative of future performance.

PAGE 1 OF 5

PERPETUAL CREDIT INCOME TRUST

TOTAL UNITHOLDER RETURN6

AS AT 31 DECEMBER 2021

1 MTH

3 MTHS

6 MTHS

1 YR

3 YRS P.A.

5 YRS P.A

SINCE INCEP P.A.

Total unitholder return

1.7%

2.8%

5.7%

7.0%

-

-

2.7%

RBA Cash Rate

0.0%

0.0%

0.0%

0.0%

-

-

0.3%

Excess returns

1.7%

2.8%

5.6%

7.0%

-

-

2.4%

Distribution return

0.3%

0.9%

1.8%

3.7%

-

-

3.2%

useonly

6

Total unitholder return - ASX unit price performance with reinvestment of distributions has been calculated on the growth of the ASX unit

price and assumes reinvestment of distributions on the ex-date. Distribution return has been calculated based on the total unitholder return less the growth in the ASX unit price over the period. Past performance is not indicative of future performance. Since inception return is from listing on 14 May 2019, initial price used is the subscription price of $1.10. Unitholder return and index return may not sum to excess return due to rounding.

NTA PER UNIT VS ASX UNIT PRICE PERFORMANCE

TRUST COMMENTARY

personalINCREASED DISTRIBUTION

The Trust aims to provide monthly income and has a target total return of RBA Cash Rate + 3.25% p.a. (net of fees) through the economic cycle^.

The Trust's portfolio's running yield was the most significant component of return over the month of December. This was derived from the Trust's income which was predominantly generated by coupon payments and interest income from portfolio exposure to non-financial corporate bonds and residential mortgage-backed securities (RMBS). Non-bank financials, domestic banks and property also contributed to income return.

The running yield combined with capital gains realised through active trading led to the amount of distributable income increasing in December. The distribution for December 2021 was 0.35 cents per unit (November 2021: 0.31 cents per unit) which results in an annual distribution return of 3.4% based on NTA or 3.7% based on the ASX unit price*. This exceeds the T ust's target return rate.

The Manager actively monitors its distribution position and is confident in its ability to generate income in the short term. It b lieves the running yield provides robust support and stability in the portfolio as market volatility may continue to impact p rformance. In particular, the Trust is weighted towards corporate credit and high yield assets as the Manager believes there are quality issuers offering healthy yields. As at 31 December 2021, high yield assets comprised more than half of the portfolio and provide more attractive income than investment grade assets. In a persistent low yield environment with credit spreads at very tight levels, active management based on rigorous research and due diligence is, in the Manager's view, essential. The Manager continues to look for relative value opportunities with the aim of identifying quality issuers offering a competitive

Forunning yield.

PORTFOLIO PERFORMANCE

The Trust's portfolio returned 0.2% in December, outperforming the RBA Cash Rate (benchmark). Over the 12 months to 31 December 2021, the portfolio has returned 4.4%.

Credit spread performance was mixed across sectors with financials outperforming corporates and securitised sectors over the month. The Trust's exposure to non-financials corporates and RMBS detracted marginally from performance as spreads in these sectors saw widening. Key changes to the portfolio are detailed below.

The Manager participated in a new deal from listed real estate investment trust, Centuria Industrial REIT (ASX:CIP). CIP came to market for $350 million with a 6-year senior unsecured fixed rate issue. The Manager hedged this fixed rate bond back to floating rate to manage interest rate risk. Supplementing this, the Manager also elected to add commercial real estate trust exposure in secondary markets.

The Trust's cash level ended the month slightly elevated as a result of profit taking in the non-financial corporate and non-bank financial sectors. The redemption of a callable high yield bond from heavy machinery and engineering firm Civmec also contributed to the marginally elevated cash level.

^ This is a target only and may not be achieved * As at 31 December 2021

PAGE 2 OF 5

PERPETUAL CREDIT INCOME TRUST

HOW WE INVEST

The Manager employs a robust, active and risk aware investment process to invest across the broad credit and fixed income universe. It aims to find the most attractive credit investment opportunities on a risk-adjusted basis at any point in time. The investment strategy is outlined in more detail below.

Diversification - the Trust is actively managed and through its flexible investment strategy diversification can be achieved across asset type, credit quality, maturity, country and issuer. The allocation to high yield assets (sub-investment grade and unrated assets) provides the opportunity to generate higher returns for the portfolio while complementing the allocation to investment grade assets. The Manager typically focuses on assets at the top of the capital structure such as senior or

onlysubordinated debt as these assets are higher in the order of priority for payment in the event the issuer of the asset is liquidated.

Australian focused credit LIT - while the Trust has the flexibility to invest globally, the preference generally is to focus on Australian issuers which can be listed or unlisted and denominated in AUD or foreign currencies. The Manager believes its local presence and ability to meet borrowers and their management team provides an advantage in assessing opportunities and managing credit risk for the portfolio.

Income - the Trust's income is primarily generated by coupon payments from corporate bonds and asset backed securities, and interest income from investment in loans. Importantly, there is reliability in the receipt of these payments from borrowers as there is an obligation to pay unlike dividend payments from listed companies which are at the discretion of the Board.

useTherefore, predictability of coupon payments is typically high. The Trust's income also contributes to the running yield which is the expected return (based on net tangible assets) of the portfolio assuming assets are held to maturity. The Trust achieves its running yield by investing in a diverse mix of assets across issuers, sectors and asset types.

Investment performance - this is generally determined by the Manager's selection of assets for the portfolio and the movement of credit spreads. Credit spreads refer to the compensation or return provided for accepting credit risk, which is the risk that a borrower or counterparty does not meet its principal and/or interest payment obligations as they fall due. When credit spreads tighten, this indicates improving market conditions and/or a more positive view on the risk profile of borrowers. This means the value of an existing asset in the portfolio will increase. Conversely, when credit spreads widen, the value of the asset in the portfolio will decrease. This is usually the result of uncertain economic conditions or where the perceived

personalcreditworthiness of the borrower has deteriorated.

Valuation of assets - the assets in the portfolio are typically bonds and floating rate notes which are tradeable with daily pricing and liquidity. Where external pricing is not available, loan valuations are considered by the Perpetual Loan Valuation Committee (LVC) and valued at fair value. This means if there is a market price dislocation, as we observed in 2020 with the pandemic, or a risk of impairment on a credit, the fair value changes.

Critical to the Manager's investment process is having regular access to information to enable credit risk to be monitored on an ongoing basis. This allows the assessment of the loans to be current and timely. The full value of the portfolio's assets is reflected in the Trust's estimated Net Tangible Asset (NTA) released to the ASX daily.

For________________________________________________________________________

INVESTOR COMMUNICATIONS

The PCI website hosts a range of information including Monthly Investment Updates, Portfolio Manager insights, dividend history and educational resources. The my investments section of the website also includes details for the Automic Investor portal, where you can elect to receive regular communications, periodic statements and updates electronically.

PAGE 3 OF 5

PERPETUAL CREDIT INCOME TRUST

INVESTMENT OBJECTIVE

To provide investors with monthly income by

investing in a diversified pool of credit and fixed

income assets.

TARGET RETURN

only

The Trust has a target total return of RBA Cash

Rate plus 3.25% p.a. (net of fees) through the

economic cycle. This is a target only and may not

be achieved.

INVESTMENT STRATEGY

The Perpetual Credit Income Trust (PCI) (the

"Trust") will hold a diversified and actively

managed portfolio of credit and fixed income

assets.

use

The Trust will typically hold 50 to 100 assets.

30% - 100%

Investment grade assets

0% - 70%

Unrated or sub-investment grade

assets

70% - 100%

Assets denominated in AUD

0% - 30%

Assets denominated in foreign

personalFor

currencies (which are typically

hedged back to AUD)

0% - 70%

Perpetual Loan Fund

The Trust will diversify exposure and will have maximum exposure limits to issuers.

Typical investments will include corporate bonds, floating rate notes, securitised assets and private debt (for example, corporate loans). Exposure to corporate loans may be gained indirectly through the Perpetual Loan Fund.

PERPETUAL KEY CONTACTS

ABOUT THE MANAGER

The Trust is managed by Perpetual Investment Management Limited. The Manager has one of the most experienced, proven and stable credit and fixed income teams in the Australian fixed income market. The Manager and the Responsible Entity are wholly owned subsidiaries of Perpetual Limited.

PORTFOLIO MANAGERS

Michael Korber

Managing Director, Credit & Fixed Income

Portfolio Manager:

Perpetual Credit Income Trust

Perpetual Pure Credit Alpha

Michael has over 37 years' experience, having been involved in credit markets since their development in Australia during the 1990's. Unlike many other fixed income portfolio managers in this market, Michael has a background in lending and banking, understanding credit risk in a fundamental way.

Anne Moal

Head of Corporate High Yield

Portfolio Manager:

Perpetual Loan Fund

Anne is an experienced credit markets specialist, having worked for 22 years in credit and fixed income markets in research, origination and trading roles. Anne joined the Credit and Fixed Income Team at Perpetual Asset Management Australia in 2014. Anne is the portfolio manager of the Perpetual Loan Fund with a focus on higher yielding income opportunities.

INVESTOR RELATIONS

NSW

VIC/SA/NT/TAS

Karen Trau

Mark Williams

Daniel Moore

P: 02 9229 3138

Key Account Manager

Regional Manager

E: karen.trau@perpetual.com.au

P: 0405 385 960

P: 0400 032 819

E: mark.williams@perpetual.com.au

E: daniel.moore@perpetual.com.au

QLD

WA

Tony Harte

Tim McCallum

Regional Manager

Regional Manager

P: 0407 708 109

P: 0411 209 403

E: tony.harte@perpetual.com.au

E: tim.mccallum@perpetual.com.au

PAGE 4 OF 5

PERPETUAL CREDIT INCOME TRUST

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Perpetual Credit Income Trust published this content on 23 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 January 2022 22:53:07 UTC.


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