DJ Quarterly Review
M&G Credit Income Investment Trust plc (MGCI) Quarterly Review 05-Nov-2025 / 09:52 GMT/BST =---------------------------------------------------------------------------------------------------------------------- M&G CREDIT INCOME INVESTMENT TRUST PLC (the "Company") LEI: 549300E9W63X1E5A3N24 Quarterly Review The Company announces that its quarterly review as at 30 September 2025 is now available, a summary of which is provided below. The full quarterly review is available on the Company's website at: https://www.mandg.com/dam/investments/common/gb/en/documents/funds-literature/credit-income-investment-trust/ mandg_credit-income-investment-trust_quarterly-review_gb_eng.pdf Market Review The third quarter was largely a positive period for financial markets. Global stock markets continued to recover from the tariff-induced sell-off in April as trade tensions subsided, with gains also fuelled by strong corporate earnings, anticipation of Federal Reserve rate cuts, and continued enthusiasm around Artificial Intelligence (AI) and technology innovation. Bond market performance was more modest, with concerns about inflation and fiscal positions weighing on sentiment, particularly in Europe. In July, a month's delay in tariff implementation improved the mood music and preceded the eventual announcement of a series of bilateral trade agreements between the US and key partners. Deals with the EU, Japan, and South Korea helped calm uncertainty, with rates that were lower than originally announced, aiding risk assets to stabilise. However, the potential impact of US trade tariffs on the global economy remained a dominant theme for investors. Although there was little evidence of a tariff effect on economic data, as global growth remained broadly resilient, volatility remained a persistent undercurrent in markets, with investors weighing a range of unresolved macro risks and trade policy remaining a key source of uncertainty. A disappointing US employment report in August showed virtually no net job growth even as inflation nudged slightly higher, which stoked fears of an economic slowdown. However, Federal Reserve (Fed) Chair Powell used a dovish speech at Jackson Hole to set the scene for the first Fed rate reduction of 2025, which duly arrived when the FOMC delivered a 0.25% cut at its September meeting. In the Eurozone, inflation hovered right around the ECB's 2% target, allowing policymakers to pause further easing with a hawkish bias. Growth indicators remained tepid, underscoring a 'flat but not collapsing' economy. The United Kingdom saw inflation hold at a painful 3.8% - the highest among G7 economies - which forced the Bank of England to hold off on more rate cuts after its summer easing. The MPC emphasized the difficult balancing act being faced, that while the UK economy is fragile (with very slow growth and rising unemployment), inflation remains far above target. Manager Commentary In the third quarter of the year the Company delivered a NAV total return of +1.85% compared to the +2.05% returned by the benchmark. Underperformance was driven by defensive positioning in the portfolio which has meant foregoing yield in the short term as we await for market conditions to present, what in our opinion, are more attractive opportunities to add risk. During the quarter we continued to see sustained demand for share issuance, with the Company's market capitalisation increasing by c.GBP10.7m. We added GBP8m to our exposure in the M&G Investment Grade ABS (IGABS) fund given its attractive risk-return characteristics and our desire to go up in credit quality. By way of comparison, the IGABS underlying portfolio has an average credit rating of AA and has offered a yield of 5.70%, which screens favourably to the majority of the sterling BBB corporate universe where yields have averaged approximately 5.5% for taking on notably more risk. We invested selectively in new issues where there was still what we considered to be a 'decent' spread on offer (within the relative context of currently very expensive credit markets). We participated in both the Ford Motor euro (EUR0.8m) and sterling (GBP0.9m) new issues which printed at G+200bps for BBB- risk and the senior preferred bond from Finish bank Oma Saastopankki (GBP0.6m) which printed at EURIBOR+230bps for BBB risk. We also invested (GBP0.8m) in the new secured bond from Southern Water which printed at the wider end of recent investment grade new issues at G+270bps. Despite the well publicised ongoing issues in the sector, the company retains strong equity backing and there have been recent positive political and regulatory developments which are fundamentally constructive for the longer term sector outlook. In the private market we deployed GBP4.2m over the quarter. This included GBP0.7m in the latest tranche from an existing microfinance borrower, GBP1m invested in a senior secured term loan to a UK-based IFA platform, and GBP1m in a senior secured term loan issued by a global leader of air pollution control and noise abatement solutions. We also added GBP1.5m to our position in SALIS 2019-1 (A) via an internal purchase from another M&G fund, making it one of the largest positions in the portfolio (GBP2.8m / 1.6% of NAV). This is a Regulatory Capital deal for a credit linked note backed by a diversified portfolio of UK SME loans. We've held a position in the portfolio for a number of years and it has performed very well, hitting our 'sweet spot' in terms of risk-return - offering an implied spread of +420bps for (internally rated) BBB+ risk. Outlook In the immediate term, the largest and most persistent impact of the tariff war on the global economy has been the creation of uncertainty and lasting damage to business confidence. Longer term effects remain hard to quantify and will take time to ripple through the global economy. Significantly, a confluence of additional risks also weigh on the outlook for the remainder of the year, including (but not limited to) upward pressure on inflation, geopolitical and conflict risk, rising bond yield term premia, the impacts of fiscal and broader policy dynamics, and the sustainability of the AI boom, all of which are serving to create a challenging and unpredictable investment backdrop. Despite the considerable downside risks, a paradox exists between credit spreads and the economic outlook, with investors not being sufficiently compensated for the magnitude of these risks. Current levels of market exuberance certainly feel overdone and in our opinion investor aversion to bad news is leading to complacency. Credit spreads tightened even further over the prior quarter and at time of writing are at almost 20-year lows. BBB credit (the lowest rung of investment grade) currently offers barely 100 basis points additional return over sovereign benchmark yields. Tight credit spreads have been a persistent theme throughout much of the year and we maintain that such levels underprice corporate risk and are not adequately accounting for potential market stress. At this stage of the economic cycle we aren't attempting to make bold predictions around the direction of the global economy or specific outcomes - but what we are saying is that despite overall corporate fundamentals remaining stable, razor-thin credit spreads offer a low premium for taking on risk, making the market vulnerable to sharp corrections from economic or geopolitical shocks. We don't necessarily know what the catalyst for a wider market repricing will be, but we do know from experience that it's a matter of 'when' and not 'if'. Adding risk when it is expensive to do so can significantly erode long-term portfolio gains, and it is therefore essential to resist overexuberance and herd mentality, focussing instead on credit fundamentals and rational, long-term value. Under these market conditions, where credit valuations are stretched, we believe that our flexibility in being able to invest across the breadth of both public and private markets can be a powerful differentiator in helping to generate what we feel are attractive risk-adjusted returns for our shareholders. It remains as important as ever that we maintain our patient and disciplined investment approach and at current valuations we will continue to keep the portfolio defensively positioned, prioritising credit quality over yield. This positioning is intended to shape the portfolio to be a net beneficiary of any future credit spread widening and market volatility, and whilst this may mean foregoing portfolio returns in the short term, in our opinion it is fundamental to driving strong performance over a longer term investment horizon. Should further market volatility give rise to attractive opportunities, we have access to a GBP40 million credit facility and a further GBP44 million invested in two AAA/AA-rated, daily dealing ABS funds, ready to be reallocated. MUFG Corporate Governance Limited Company Secretary 5 November 2025 - ENDS - The content of the Company's web-pages and the content of any website or pages which may be accessed through hyperlinks on the Company's web-pages, other than the content of the Update referred to above, is neither incorporated into nor forms part of the above announcement. For further information in relation to the Company please visit: https://www.mandg.com/investments/private-investor/ en-gb/investing-with-mandg/investment-options/mandg-credit-income-investment-trust =---------------------------------------------------------------------------------------------------------------------- Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. =---------------------------------------------------------------------------------------------------------------------- ISIN: GB00BFYYL325, GB00BFYYT831 Category Code: MSCL TIDM: MGCI LEI Code: 549300E9W63X1E5A3N24 Sequence No.: 407273 EQS News ID: 2224234 End of Announcement EQS News Service =------------------------------------------------------------------------------------
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(END) Dow Jones Newswires
November 05, 2025 04:52 ET (09:52 GMT)
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