Five-year anniversary of the launch of Metrics Master Income Trust (ASX:MXT)
Metrics Master Income Trust (ASX:MXT) pioneered public market access to the fast-growing world of private debt in Australia when it listed on the ASX in October 2017. Five years on, MXT has more than trebled in value to $1.75 billion, and with this, increased the number and diversity of loans Metrics provides to businesses and projects. Underpinning this growth has been Metrics strong risk management culture, protecting investor capital while providing consistent, attractive risk-adjusted returns with consistent monthly income distributions.
When Metrics Credit Partners (Metrics) was founded in 2011, interest rates were on their way to record lows while banks were emerging from the fallout of the global financial crisis (GFC) and beginning a long, slow retreat from lending to Australian corporates. Conditions were ripe for the establishment of a funds management firm specialising in private markets debt, equity and capital markets, which balanced the demands of business for finance with the needs of income-focused investors for superior risk-adjusted returns to those available from traditional fixed income investment options.
Following the success of Metrics unlisted wholesale funds, Metrics Master Income Trust (ASX:MXT) was the first ever private debt fund to be listed on the ASX, providing investors with the opportunity to access the asset class in a liquid tradeable format via secondary trading on the ASX.
In October 2017, MXT raised $514 million. As a result of investor support, subsequent capital raisings have seen the fund increase in size to more than $1.75 billion, making it the largest and most liquid private debt fund listed on the ASX. MXT is now one of 16 investment vehicles provided by Metrics Credit Partners, which manages in excess of $13 billion of investor capital. In 2022, Metrics won Best Private Debt Fund at the Australian Alternative Investment Management Awards for the 3rd year running and was named Best Australian Fixed Interest investment manager at the Zenith Investment Partner Fund Awards.
In the five years since listing, the net asset value of MXT has remained at or above its $2 issue price and net returns have averaged 5.08% per annum. This represents a spread of 4.28% to the RBA Cash Rate over the same period(1), well in excess of the stated Target Return of RBA Cash Rate + 3.25% p.a.
This year, rating houses Zenith and Bond Adviser gave MXT their top rating, “Highly Recommended”. MXT also received a “Superior” rating from Foresight Analytics, “Recommended +” from Independent Investment Research, and “Recommended” from Lonsec. These returns have been achieved through an interest rate cutting cycle. As interest rates increase, returns to investors are also rising because the fund has exposure to short-dated, floating rate loans whose interest rates adjust in-line with changes in the RBA cash rate.
MXT remains popular with a range of investors as they navigate increasingly volatile public markets, delivering regular income and stability of capital.
Metrics’ origination and portfolio management processes are a vital element of the success of MXT. By establishing and maintaining strong relationships and providing a high level of service to borrowers, Metrics can directly originate lending opportunities. Not only does this generate additional revenue for investors from the fees paid by borrowers, but it also allows Metrics to negotiate the terms, covenants, conditions, and security for each loan. Prior to approving a new loan, Metrics completes detailed due diligence on each borrower to ensure the company can service and repay the loan, including stress testing the borrower for a range of different market conditions, such as rising costs and interest rates. Metrics also maintains regular monitoring of each borrower over the life of the loan and regularly stress-tests the portfolio.
MXT provides investors with exposure to a large and growing number of loans, diversified across borrowers, industries and loan types, ensuring that no individual borrower has an outsized impact on the performance of the fund. At the time of listing, MXT had exposure to 62 borrowers. With growth in capital to $1.75 billion the number of loans has risen to more than 290 individual loans, meaning the average loan exposure is less than 0.4%.
MXT’s portfolio is invested in short-dated, floating rate loans, which provides greater flexibility for repricing loans, resetting terms as loans mature and, in turn, reducing the credit risk to investors. The portfolio has an average duration of 2 years, so as loans are repaid or refinanced, it reduces risk and also generates an important source of income in the form of new origination fees.
In the 5 years since listing, MXT has successfully delivered monthly income to investors, while preserving capital value. This has in turn enabled MXT to regularly return to the market to raise capital and to meet the debt financing requirements of a growing number of corporate borrowers.
Andrew Lockhart, Managing Partner at Metrics Credit Partners, provided insights into the opportunity and outlook for Australian private debt in…