Is now the time to invest in small caps?
In this edition of the IIR LMI Monthly Update we take a look at the key news in June as well as whether now is the time to be investing in small caps given the RBA rate cuts that have occurred this year and the further rate cuts forecast. See the attached report for the piece on small caps and IIR rated LICs and LITs that provide exposure to small caps that may be worth consideration.
The keys news included:
PE1 Continues to Focus on the Discount
The Trust stated in the webinar that they are prepared to materially reduce the size of the Trust to remedy the discount. IIR views the material discount as an attractive opportunity for long-term investors given the Trust has highlighted its intentions to address the discount and the high regard in which we view the Manager of the portfolio.
L1 Capital Not Supporting PMC Scheme
If shareholders vote in favour of the Scheme, the Board is proposing to pay a special dividend approximately equal to the Company’s retained earnings prior to the Implementation Date. The dividend will be franked to the maximum extent possible but will not be fully franked. Based on the retained earnings as at 31 May 2025 and expected restructure costs, the special dividend would be 13.53 cents per share and 49.9% franked.
Restructure of MCP Credit Trust Approved
- Restructure of MCP Credit Trust - a new unit trust named Metrics Credit Trust 2 (MCT2) will be established. MCT2 will acquire certain assets from MCP Credit Trust in return for the issue of units in MCT2. Following the disposal of the assets to MCT2, MCP Credit Trust will undertake an in-specie distribution of the MCT2 units, by way of a return of capital, based on their proportionate interest in the MCT2 portfolio. MCT2’s investment objective and strategy will be substantially similar to MCP Credit Trust.
- Sale of Interest in Taurus & BCI to Navalo Financial Services - MCP Credit Trust has a 100% interest in the Taurus Financial Group (Taurus) and a 29.8% interest in BCI Investment Group (BCI). In March, MCP Credit Trust announced the acquisition of the remaining equity in BCI. The acquisition has a purchase price of $140.3 million upfront and deferred consideration of $6.9 million. Unitholders have agreed to sell the interest in Taurus and the minority interest in BCI to Navalo Financial Services (a newly established wholly owned subsidiary of Metrics Credit Holdings (MCH)) in exchange for shares in MCH. As a separate transaction, Navalo will acquire the remaining interest in BCI. To fund the acquisitions, MCP Credit Trust will acquire MCH shares for cash consideration equal to the purchase price of the BCI majority interest which will be used to capitalise Navalo. MCP Credit Trust’s exposure to MCH will be 15.4% post the restructure and transaction with MOT’s ~3.9%.
During the month, Platinum Asia Investments Limited (ASX: PAI) announced that a draft scheme booklet had been lodged with ASIC and the ASX. A scheme booklet is scheduled to be released on or around 11 July and a Scheme meeting schedule for 12 August.
KKC Maintain Distribution Target for FY26
KKC provides exposure to a diversified portfolio of traded and private debt through the GCOF and European Direct Lending strategies with exposure to both fixed and floating rate securities. Given the current market uncertainty, we believe investors should be looking for actively managed portfolios for their fixed income exposure.
During the month, Bailador Technology Investments Limited (ASX: BTI) announced a number of revaluations for investments in the portfolio, tabled below. Included in the revaluations was a 49% uplift in the valuation of DASH after new capital was raised. There was also an 24% uplift in the valuation of Updoc, the third largest position in the portfolio.
In light of the revaluations, the private portfolio has delivered a gross return of 32.8% for the FY25 period.
On 5 June 2025, WAM Active Limited (ASX: WAA) announced it and other entities within the Wilson Asset Management Group had provided a bridge funding facility to Keybridge Capital Limited (ASX: KBC) until the company is in a position to undertake a recapitalisation. Wilson Asset Management owns ~45% of Keybridge across its entities.
GVF Raises $16.9m from Wholesale Investors and Kicks Off SPP
Capital raised will be invested in the discount capture strategy of the Company with the Company generating returns with materially lower volatility than the broader market.
In June, the MA Credit Income Trust (ASX: MA1) raised a further $49.7 million through a Placement to wholesale investors. This comes after the Trust listed in March. We also saw another fixed income LIT comes to market, with Latrobe Private Credit Fund commencing trading after raising $300 million.
