We believe private credit will present some excellent investment opportunities over the medium term, although the current wave of negative sentiment and scrutiny may have further to run. As is often the case, the best opportunities tend to emerge when investors become overly pessimistic, but timing will be important.
- Metrics Credit Partners: We are becoming interested again following the recent weakness. We previously held MXT but exited due to concerns that the risks within its underlying portfolio were not adequately reflected in reported NTA or the prevailing ASX market price. Following the recent write-downs and sharp repricing of its listed vehicles, we believe that risk/reward equation is starting to shift in investors’ favour.
- Pinnacle Investment Management (PNI): Also looking increasingly interesting at current levels. While not a pure-play private credit exposure, we believe its diversified business model and ownership structure are more resilient than the market is currently giving it credit for.
- LEND ETF: We remain cautious, with its attractive double-digit distribution yield masking the underlying equity and credit risks. To us, LEND has the hallmarks of a classic yield trap, where headline income can be more than offset by capital losses.
