Debt LIT discounts in focus

Rodney Lay

Risk Return Metrics

The latest Listed Managed Investments Monthly for July 2020 focuses on the implied default rates of each debt listed investment trust and compares these figures to historic averages in the aggregate high yield and loans markets. 

The conclusion: implied default rates of all debt listed investment trusts (LITs) are not correlated with historical rates, neither at the broad market nor manager levels. 

For example, Gryphon Capital Investment’s (ASX:GCI) 7.5% discount to NTA at 31 July 2020 (now 11%) implies a default rate (as opposed to loss-given-default) of around 150%, assuming a recovery rate of 95% across its Residential Mortgage Backed Security (RMBS) book. We remind investors, Australian RMBS has never experienced a single default. 

We also put the spotlight on GCI and the state of play in the Australian RMBS section and Regal Investment Fund (ASX:RF1) following a volatile performance period. 

A PDF containing the full report is available below.

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Risk Return Metrics

Investment analyst with particular experience in listed and unlisted investment strategies, equities and structured products.

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