Pengana Global Private Credit Trust (ASX:PCX)

The Pengana Global Private Credit Trust offers investors exposure to a diversified portfolio of high-quality global private credit funds. This investment strategy aims to deliver strong, risk-adjusted returns with a focus on capital preservation and stable income.

Key features include a target cash distribution yield of 7% per annum paid monthly, low volatility, and low correlation to traditional asset classes. The Trust invests in a variety of private credit strategies, including direct lending, structured credit, and specialty finance.

Pengana Credit, a seasoned investment manager, oversees the Trust's investment strategy, leveraging its expertise and global network to select top-tier private credit managers. By investing in the Trust, investors gain access to a sophisticated investment strategy typically reserved for institutional investors.

The Pengana Global Private Credit Trust (“Trust”), offers you an opportunity to access a diversified portfolio of high-quality private credit funds across various geographies, strategies and sectors.

Key features:

• The most diversified global private credit fund on the ASX
• Targeting strong risk-adjusted returns, including a 7% p.a. cash distribution yield, paid monthly¹
• Opportunity to sell quarterly at NAV
• An asset class with historically low volatility, and low correlation to other fixed income and equity indices

¹  The target cash distribution yield is an objective target only and may not be achieved. Any shortfall in net income generated may result in a distribution payment made out of capital invested. Future returns are not guaranteed and a loss of principal may occur. Investors should review the Risks summary set out in Section 8 of the PDS. Past performance is not necessarily a guide to future performance.

The Investment Objective of the Trust is to generate strong risk adjusted returns with a high degree of capital protection as well as stable and consistent income via exposure to a diversified portfolio of global private credit investments, liquid credit investments and cash.

The Trust seeks to achieve its Investment Objective over a rolling 3 year investment horizon.

The Trust invests via an offshore fund structure into the Master Fund. The Master Fund has four share classes (each a ‘Master Class”). Each Master Class represents a sub-portfolio of cash, liquid credit investments and private credit investments that share common risk, return and other key attributes, as described below. Pengana Credit seeks to purchase what it believes to be the appropriate amount of shares in the Master Classes to create a private credit portfolio designed to achieve the Investment Objective of the Trust.

• Enhanced Cash Class – the objective of the Enhanced Cash Class is to preserve capital and achieve a return, principally paid out by way of income. This Master Class invests in fixed income securities or funds with at least annual and at best one day liquidity, senior security, and historically low volatility. The Enhanced Cash Class generally contains Open-Ended Funds.
• Income Class – the objective of the Income Class is to provide exposure to a core portfolio of private credit investments in Underlying Funds managed by private credit managers to generate attractive risk adjusted returns, with a majority of the return paid out as income. This Master Class provides investment exposure principally in Direct Lending strategies that generate contractual debt interest payments, with high diversification and strong security requirements and leverage exposure is targeted to be less than 1.5x the net asset value of this Master Class. The Income Class generally contains Open-Ended Funds or Evergreen Funds with regular liquidity windows.
• Balanced Class – The objective of the Balanced Class is to generate attractive long term risk adjusted returns. The Master Class invests in funds that employ multiple strategies (including Direct Lending, Structured Credit, Speciality Finance, Real Asset Lending and Credit Opportunities) to provide exposure to a core portfolio of private credit investments in Underlying Funds managed by private credit managers to generate returns from contractual debt interest payments, but which may also include equity components and structural leverage. Overall leverage exposure is targeted to be less than 1.25x the net asset value of this Master Class, with the Underlying Assets well diversified and with strong security. The Balanced Class generally contains Evergreen Funds.
• Total Return Class –The objective of the Total Return Class is to provide exposure to a value-add portfolio of private credit investments through investments in Underlying Funds managed by private credit fund managers to generate attractive long-term returns. The Master Class invests in funds that receive a combination of contractual debt interest payments and equity upside. These funds typically employ Credit Opportunities strategies, have lower diversification and security requirements, and generally do not use leverage. The Total Return Class generally contains Closed-Ended Funds.

Pengana Credit believes that the global private credit asset class offers attractive returns, resilience in different market and economic conditions and diversification by targeting different parts of the capital structure and market segments. Pengana Credit employs a diversified approach, anchoring portfolios with direct lending for durable yield and persistent spread premium, while adding structured credit and speciality finance to diversify the
risk/return drivers.

In executing the Investment Strategy, Pengana Credit follows an investment process that draws upon internal and external third-party expertise. In summary, Pengana Credit:

• seeks to provide the Trust with exposure to private credit assets that aim to provide stable income, a degree of capital security and attractive total returns;
• achieves this exposure principally through investing in a diversified range of funds managed by Underlying Managers that invest in private credit assets;
• aims to develop a portfolio of high-quality funds managed by Underlying Managers with complementary strategies that provide attractive returns with diversification from individual fund, manager, and strategy risks;
• may also provide the Trust with exposure to more liquid debt strategies and cash. This further complements the reduction of risk through diversification as well as maintaining operational liquidity and flexibility; and
• invests principally in European and North American funds. It may allocate to Australian funds, however, the private credit markets in Australia are smaller and less developed than in the US and Europe and the allocation is therefore expected to be lower.

The implementation of the Investment Strategy is ongoing and includes making new investments in Underlying Funds, divesting from existing Underlying Funds, managing the allocations between different assets, monitoring performance and risks, and any required hedging of currency exposure. 

The Trust seeks to provide investors with access to leading global private credit fund managers focussed predominantly on the US and Europe, which can complement existing defensive portfolio allocations. We believe the characteristics set forth below make the Trust an attractive vehicle to enable Australian investors to access global private credit.

In evaluating a potential investment in the Trust, prospective Investors may wish to consider the following:

Diversification: The Trust will provide investors with access to a portfolio of private credit investments with diversification across Underlying Manager, strategy, geography, sector, credit quality and type of instrument. We believe this diversification supports construction of resilient portfolios to protect capital while providing opportunities for yield enhancement through economic cycles. Multiple Underlying Managers allows the Trust to achieve a wide diversification with limited concentration risk and correlation, which we believe should translate to low volatility and stable returns.

Regular distribution: The Trust will target a cash distribution yield of 7% per annum (net of fees, costs and taxes incurred by the Trust) paid monthly and so is applicable to investors seeking income solutions for their portfolios. This is a target only and may not be achieved.¹

Defensive investment: the private credit asset class has a strong historical track record of low volatility, attractive returns and low correlation to other asset classes such as public fixed income and equity. This provides potential diversification benefits and enhancements to the risk/return profile of a Unitholder’s investment portfolio.

Simplicity: The Trust will serve as a single point of entry to a well-diversified Portfolio of private credit investments (over 2,000 individual loans across 19 Underlying Funds).

Institutional investment management: The Trust will provide investors with access to an investment management capability that is typically only available to institutional clients.

Liquidity: Private credit investments typically involve the investors’ capital being locked up for a number of years. The Trust will allow small and large investors to gain exposure to global private credit with the flexibility to buy and sell Units on the ASX so long as an active market exists.

Access: Global private credit investments can be challenging to access for individual investors. The Trust will seek to provide investors with exposure to difficult-to-access global private credit investments predominantly in middle market companies (typically being those with USD$50m-250m of annual EBITDA) through managed investment funds approved by Mercer.

Bespoke solution: Mercer will create a solution tailored specifically to the requirements and objectives of the Trust, utilising its highly experienced team, strong global relationships and fee efficiencies.

Capital management initiatives: The Responsible Entity, in consultation with the Manager and Investment Manager, will regularly review the capital structure of the Trust and, where the Responsible Entity considers appropriate, undertake various capital management initiatives that are ultimately designed to reduce the likelihood that the market price of Units will deviate materially from the NAV per Unit.

¹ The target cash distribution yield is an objective target only and may not be achieved. Future returns are not guaranteed and a loss of principal may occur. Any shortfall in net income generated may result in a distribution payment made out of capital invested. Investors should review the Risks summary set out in Section 8 of this PDS.