Comments on global private credit and PCX
Australian investors have been denied a key diversifier for too long, with global private credit markets until now only accessible to the largest of investors.
Yet global private credit, based on quality bilateral loans to mid-sized corporates in the USA and Europe, can bring a new source of returns and diversification to investor portfolios.
Highly regarded financial markets commentator, Christopher Joye, recently touched on Pengana’s unique listed global private credit vehicle, the Pengana Global Private Credit Trust (ASX: PCX).
As part of the latest Complexity Premia podcast, which is hosted by Mr Joye, he mentioned the potential for PCX as a genuine alternative to other income-generating investments including hybrids:
“Though it’s not in our commercial interest to discuss this, I find it fascinating that fund manager Pengana and leading consultant Mercer have created a new listed Investment Trust (LIT) that will trade under the ASX ticker PCX. This will give investors an allocation to around 16 global, not local, private credit funds that focus on exposures outside of Australia and have minimal to no exposure to commercial property or residential development, unlike most domestic private credit funds.
“It will be interesting to see if there will be a switch from ASX-listed hybrids to the Pengana Mercer Global private credit LIT (PCX), given that hybrid spreads are very tight right now. Historically, hybrids have paid around 3.3% to 3.5% above bank bills, whereas currently, they are only paying about 2.3% above bank bills. We might see some switching from those tight hybrid spreads into the global private credit solution.”
Genuine diversification
Diversification is critical as markets wrestle with significant challenges including inflation rates which are proving to be much stickier than investors, economists and central bankers would like.
Global private credit offers a defensive approach which has a low correlation to listed investments such as equities and traded credit, and behaves very differently to other vehicles including hybrids.
Global private credit has delivered attractive floating rate yields, which provide protection from rising rates, and low volatility. It also offers great potential for capital preservation from strong underlying structural protections.
The Pengana Global Private Credit Trust (ASX: PCX) provides Australian retail investors a way to access this highly sought-after asset class, via a liquid vehicle, which will be highly diversified with over 19 managers and >2,000 underlying loans.
The offer to obtain units in the PCX IPO is open until Thursday, 6 June 2024.
