Gryphon Capital Investments are currently raising up to $350m for their new Listed Investment Trust (LIT), Gryphon Capital Income Trust (GCI). GCI is a fixed income focused product with monthly distributions, aiming to help fill the fixed income component of many investors’ portfolios. The offer is expected to close on 2 May 2018 unless fully subscribed prior.
The fund targets a predictable monthly income stream.
It invests in:
GCI is aiming to fill the fixed income part of an investor’s portfolio, promising low volatility and an attractive income yield, primarily be investing in residential mortgages.
Gryphon Capital has traditionally managed portfolios for large institutional clients. As a result, there’s no direct comparison available of the strategy being promoted. They do list two examples in the Prospectus, for strategies with targets of 5% and 2.7% above the RBA cash rate respectively. Both strategies have outperformed the benchmark, albeit over a short time frame, dating back to just 2015.
Gryphon Capital Investments were founded in 2014 and now manage $1.7b of fixed income assets. To date they have only dealt with institutional clients, with GCI being the first opportunity for retail investors to invest in their strategy.
According to the ETF Watch Fund Database, there's 3 fixed income LIC/LITs and 20 ETFs available on the ASX. The only LIC with size to note is the reasonably recently listed MCP Master Income Trust (MXP), a fund that raised over $500m in just November last year, proving the demand for this type of strategy. The key difference between MXP and GCI appears to be the type of fixed income investment they target, with GCI targeting residential mortgages, and MXT corporate debt.
The fund will be listed as a Listed Investment Trust (LIT), compared to the more common Listed Investment Company (LIC) structure. We looked at the two structures when Forager Australian Shares listed last year, with the key difference being the trust structure must pay out all earnings to investors, whereas a company is able to retain earnings.
In what is now the norm for LIC IPOs, there will be no 'free' options tied to the offer, with the company absorbing all costs associated with listing, and repaying this cost over time through management fees. This is great news for investors, as it means investors in the IPO will not have their initial Net Asset Value reduced, and for each $2 share purchased, there will be $2 available for the manager to invest on day 1.
Management costs of the fund will be 0.96% per annum.
This post was prepared with publicly available information available from Gryphon Capital Investments. ETF Watch did not receive any payment from Gryphon Capital for this post.