Monthly Listed Investment Trust Report – Aug 2025

This story features METRICS MASTER INCOME TRUST, and other companies. For more info SHARE ANALYSIS: MXT

Download related file: IIR-Monthly-LMI-Update_8-August-2025

Independent Investment Research updates developments in Australia's listed investment trust and provides comparative data.

A Listed Investment Company (LIC) is a listed investment vehicle that offers investors access to a diversified portfolio of shares in other companies also listed on the stock market.

Note: For comprehensive comparative data tables for LICs and ETFs please see attached.

Below we provide a summary of the LMI reviews completed since our last newsletter. The reviews include Metrics Master Income Trust ((MXT)) and Metrics Income Opportunities Trust ((MOT)).

The reviews are available from the IIR website (www.independentresearch.com.au) or can be requested from the Managers.

Metrics Master Income Trust ((MXT))
Metrics Master Income Trust provides exposure to a portfolio of loans to Australian companies diversified by borrower, industry and credit quality. The Trust is managed by Metrics Credit Partners (“Metrics” or the “Manager”), an Australian private markets specialist asset manager founded in 2011 with significant expertise in the Australian corporate loan market.

MXT invests in the MCP Wholesale Investment Trust (“MCP WIT”), which in turn invests in three wholesale funds managed by Metrics: (1) Metrics Credit Partners Diversified Australian Senior Loan Fund (DASLF) (60%); (ii) MCP Secured Private Debt Fund II (SPDF II) (20%); and (iii) MCP Real Estate Debt Fund (REDF) (20%).

The wholesale funds provide exposure to the Australian corporate loan market but with differing risk-return investment profiles and target loan investments. From a credit quality perspective, the Manager targets the investment through to sub-investment grade segment
(A through to B rated), reflecting the Manager’s view that this segment presents a particularly attractive opportunity set in terms of market pricing relative to default risk. Through the underlying investments, the Manager is targeting a return equal to the RBA Cash Rate + 3.25% per annum, net of fees and expenses.

The Trust pays distributions on a monthly basis with returns reflecting the income generated by the portfolio in any given month. Fees are paid at the wholesale level with no fees charged by the Manager at the Trust level. Fees are highly competitive with a look through management fee of 0.60%p.a. DASLF, the largest allocation of the Trust, does not charge performance fees, however SPDF II and REDF charge a performance fee for the outperformance of the relevant hurdles (total fees for these funds are capped at 0.75%p.a.).

The Trust provides investors exposure to a diversified actively managed portfolio of direct loans to Australian corporates. The Trust is suitable for investors that are seeking a regular monthly income stream with the potential to generate attractive risk-adjusted returns. An investment can be considered as part of a broader fixed income portfolio with the Trust providing diversification and a different return profile to fixed rate bonds.

Private credit is very hands-on transactional, with the focus on originating transactions, conducting detailed bottom-up due-diligence, structuring the loan and managing the loan life-cycle thereafter. As such, the Manager’s ability to successfully structure and manage transactions that meet the investment objectives and avoid credit defaults is critical. In this regard, the Manager has a strong track-record with minimal defaults. The portfolio has exposure to sub-investment grade loans which have a higher level of default risk associated with them.

Investors should be mindful that defaults generally tend to cluster during periods of prolonged economic distress. IIR has maintained a Recommended Plus rating for MXT. The Trust provides exposure to a highly diversified portfolio of corporate loans that has delivered investors a return that exceeds the target distribution throughout its history with only one credit loss resulting in the NAV remaining steady.

The Trust has continued to grow with all capital raised at NAV with MXT the largest LIT in the fixed income peer group and the fourth largest LIC/LIT on the ASX. The Manager has continued to grow with investors benefiting from the scale achieved by the Manager and the origination channels developed. While growth of the Manager has been a positive on many fronts, the increase in the number of funds/investment vehicles offered has increased the complexity associated with regards to the crossover between funds with the Manager using the various structures across the business to restructure underperforming loans.

Exposure to predominantly floating rate loans has benefited investors in recent years and highlighted the benefits that private credit can provide to a broader fixed income portfolio throughout market cycles. The portfolio remains in a healthy position. While the increased stress in the economy from inflationary pressures has seen some loan enforcements, these have represented a very low percentage of the portfolio with only one loss throughout its history, in which the Manager recouped a large portion of the loan amount.

Metrics Income Opportunities Trust ((MOT))
Metrics Income Opportunities Trust listed in April 2019 raising $300 million through the issue of 150 million units at a price of $2.00 per unit. Since listing the Trust has grown to a market cap of in excess of $650 million and has 332.5 million units on issue. The Trust is managed by Metrics Credit Partners (“Metrics” or the “Manager”) and is one of three LITs issued and managed by Metrics. MOT provides exposure to a portfolio of private credit investments with the Trust seeking to provide exposure to assets across the private credit market spectrum.

Exposure is provided through an investment in and alongside wholesale funds managed by Metrics. The Trust provides exposure to the full spectrum of the capital stack including senior ranking debt, subordinated debt and equity. The Trust is mostly exposed to loans, however also provides investors with the potential for upside gains through exposure to private equity and equitylike securities. The portfolio will be exposed to low investment grade and sub-investment grade loans (BBB to Not Rated), with the portfolio historically being predominantly allocated to sub-investment grade exposure.

The Trust has a target cash distribution of 7.0%p.a. and a target total return of 8%-10%p.a. through the economic cycle which reflects the potential for capital gains as well as income. The Trust provides investors exposure to a diversified portfolio of private credit investments, predominantly to Australian corporates, with a focus on CRE debt and equity exposure. The Trust is suitable for investors that are seeking a regular monthly income stream with the potential to generate attractive risk-adjusted returns.

The Trust is predominantly exposed to sub-investment grade borrowers, which have a higher level of default risk associated with them. In addition to this, the portfolio has exposure to subordinated loans and equity securities, which rank behind senior lenders in the capital structure and are inherently more risky. With over 80% of the portfolio typically allocated to CRE debt and equity, investors should essentially consider an investment in MOT as a CRE debt and equity investment with exposure to other sectors immaterial. The Trust is considered to be at the higher-end of the risk spectrum in the fixed income asset class.

Private credit is very hands-on transactional, with the focus on originating transactions, conducting detailed bottom-up due-diligence, structuring the loan and managing the loan life-cycle thereafter. As such, the Manager’s ability to successfully structure and manage transaction that meet the investment objectives and avoid credit defaults is critical. In this regard, the Manager has a strong track-record with minimal defaults.

Investors should be mindful that defaults generally tend to cluster during periods of prolonged economic distress. The diversified nature of the portfolio reduces the risk associated with any one investment, however we do note that some of the underlying wholesale funds invested in do have some concentrated exposures.

IIR has maintained a Recommended rating for MOT. The Trust has continued to benefit from the growth in the underlying wholesale funds which has seen a material increase in the diversification of the underlying wholesale funds over the history of the Trust. The exposure and risk profile of the Trust has evolved over time with an increased exposure to equity/equity-like instruments and the recent addition of the Metrics Real Estate Multi-Strategy Fund (MRE) to the portfolio. Further to this, there has been a restructure of the MCP Credit Trust (CT) that has resulted in MOT having an indirect exposure to shares in Metrics Credit Holdings (MCH), of which the Manager is a wholly-owned subsidiary.

The Manager has continued to grow with investors benefiting from the scale achieved by the Manager and the origination channels developed. While growth of the Manager has been a positive on many fronts, the increase in the number of funds/investment vehicles offered has increased the complexity associated with regards to the crossover between funds with the Manager using the various structures across the business to restructure underperforming loans.

Unitholders have benefited from the increased interest rate environment with the Trust exceeding its target cash distribution over the last two years. Forecast interest rate cuts will likely impact the yield and may impact the Trust’s ability to meet the target cash distribution.

However, the extent and speed of interest rate cuts remains uncertain. While the portfolio has delivered on the total return objectives of the Trust, the unit price returns have not with the unit price experiencing heightened levels of volatility as the demand for the strategy has fluctuated over time.

Dislocation between the unit price and the NAV is a feature of listed closed-ended funds with discounts potentially providing investors an opportunity to enhance returns.

For more: see the document attached (near the top above).

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