Metrics Master Income Trust (MXT)
James, I would like your view on MXT for income. I notice you once had it in your Active Income Fund and wonder were it would sit now. Many thanks, Ian.
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Answer
Hi Ian,
We recently sold the Metrics Master Income Trust (MXT) in the Active Income Portfolio, at the time we wrote:
“As a refresher, MXT is a listed trust that provides exposure to a diversified portfolio of direct loans to Australian corporates, managed by Metrics, which has around $13bn of funds under management (FUM). They’re good operators, however, we are now questioning our holding in MXT for several reasons:
- The visibility of their underlying exposures is low. While it is a diversified portfolio with over 300 loans, the composition of its portfolio seems to be changing, adding risk that we are less comfortable with.
- The portfolio holds a mix of investment-grade and non-investment-grade exposures. Their investment grade exposure has averaged ~57% since 2017 – currently, this proportion sits at just ~48% – its lowest level since listing.
- Exposure to Real-Estate by lending to REITs and property developers/managers has averaged ~43%, which has now crept up to ~54%, its highest level of exposure since listing.
- Sub-investment grade loans have a higher level of default risk associated with them, and we are mindful that defaults generally tend to cluster during periods of prolonged economic distress.”
While Metrics are good managers, we struggle with the visibility of the underlying holdings and the trust was yet to be tested in tighter financial conditions. Given the backdrop we see better opportunities for income through other avenues, although, we do concede they have not shown signs of stress in their book at this stage.
