We have owned MXT in the Income Portfolio since they listed on the ASX in 2017. When they listed, they were the first sort of listed vehicle tapping an alternative style income market, in this case being domestic corporate loans, so sitting alongside, or in place of banks, lending to Australian corporates. Over that time, MXT has been a consistent performer, have stayed true to label and led the charge into an asset class that retail investors generally couldn’t access. They target the cash rate plus 3.25% and have over delivered versus that benchmark achieving 5.07% pa since inception with income paid monthly.
Importantly to us, the majority of corporate loans written by MXT are based on a floating market rate. So, when interest rates go up as they have done recently, the returns MXT receive will also go up. The other important aspect with MXT is that loans are generally shorter duration which provides more flexibility as the market changes. For example, if markets get the jitters, credit spreads increase as a pricing mechanism of risk, and therefore the rate at which new loans are written will also increase.
What we like: A specialist manager that was first mover in the space, now a lot more copy-cat funds although newer funds typically have wider mandates. Realistic performance target, Good fee structure of 0.66%, no performance fee.
What we don’t: Given the underlying exposure is corporate loans, pricing them is difficult so NTA may not be reflective of actual realizable value. NTA currently sits at $2.01 versus the security price of $2.09, reflecting a ~4% premium.
MM are happy holders of MXT for income
Add To Hit List
NB: The big spike lower in March of 2020 shows how panic selling in relatively illiquid markets can impact price – a ‘get me out at any price’ mentality clearly obvious.
