Income Asset Management surpasses $500m in syndicated loans and seeds MDA

Income Asset Management (ASX:IAM) clients now hold more than $500 million of bank syndicated loans, reflecting growing appetite for fixed income investments.

Following APRA’s decision to phase out the $43 billion bank hybrid market, investors are looking for investments that deliver transparency and direct exposure to assets such as syndicated loans, says IAM co-head of Capital Markets James Shillington.

“Our growth in funds invested in syndicated loans has been driven by investors who prefer to invest directly, rather than through a fund structure,” Mr Shillington said.

“Syndicated term loans represent the most attractive risk-reward in the fixed income space, typically yielding 7–10 per cent with the added rigour of multi-bank due diligence. They are very attractive to investors willing to forgo some liquidity for a higher return, without taking on the additional risks often associated with private credit assets such as property construction risk or agricultural investments.

“Investors have received an average return of 10 per cent on these loans, with full pricing transparency and yet low valuation volatility.”

Mr Shillington said investors looking for direct exposure to fixed income assets can also achieve this through the rapidly growing managed accounts market.

IAM‘s Income MDA portfolio, for instance, allocates 60 per cent to investment grade bonds and 40 per cent to syndicated term loans, targeting a return of RBA + 3.00 per cent – 3.50 per cent, he said.

The strategy is overseen by an investment committee chaired by James Simpson, co-founder of Platinum Asset Management and soon-to-be appointed IAM Board member. Joining him on the committee is IAM director Danielle Press who is also chair and non-executive director of Insignia Financial Trustees and a former ASIC Commissioner.

Mr Simpson said the philosophy behind the managed account mirrors the approach he applies to managing his own portfolios.

“The chase for yield has never been as strong as it is today, yet we see a flood of fund-based products with ritzy headline yields which barely withstand deeper scrutiny of what underlying investments they are holding.

“With a managed account, each account is individually managed with no pooling of funds, giving investors full transparency and direct ownership of assets — without the risks of retail fund lockups or capital flight.

“Investors need to understand the risk they are taking for the return they are getting, and we believe that sweet spot is in a +300 to 350 basis point margin, delivered through a combination of investment grade bonds paired with senior secured syndicated loan products.”

The Income MDA requires a minimum investment of $1,000,000 and holds more than 20 debt issuances, offering a compelling alternative to traditional private credit funds.

Custody and administration services are provided by Perpetual Corporate Trust, with trustee services from Trustees Australia Limited.