Gryphon Capital Income Trust

About this Fund

Fund Detail

FUND MANAGER Gryphon Capital Investments
INVESTMENT STYLE The Trust invests in a portfolio of Australian debt securities including residential mortgage backed securities (RMBS) and asset backed securities (ABS).
INVESTMENT PROFILE The Trust's seeks to provide monthly cash income and capital preservation at a portfolio level.
BENCHMARK RBA Cash Rate plus 3.50% per annum net of fees
FUND SIZE RBA Cash Rate plus 3.50% per annum net of fees
FEES 0.72% p.a. of NTA of the Trust



Benefits of investing in the Gryphon Capital Income Trust

Key benefits of investing in the Trust include:

  • Income - monthly cash income with a Target Return of RBA Cash Rate plus 3.50% per annum, net of fees. Investors should note the Target Return is not a forecast and is not guaranteed.
  • Diversification, low NTA volatility - Fixed income is an important component of a balanced investment portfolio providing stable income with low risk of capital loss. The Trust enables investors to diversify their income investments to a defensive asset class. The Trust's NTA since listing is evidence of the defensive characteristics and has displayed little correlation to equity markets.
  • Low risk of capital loss - The Trust's investments comprise an actively managed portfolio of securities that has the benefit of multiple layers of investor protections as set out in Section 4. The Manager's stress testing of each investment is consistent with the Trust's key objective of capital preservation.
  • Experienced Manager - Gryphon's Investment Team has over 50 years of collective experience in successfully investing in RMBS and ABS. Gryphon has developed a robust investment process, which prior to the establishment of the Trust, had only been accessible by institutional clients.
  • Attractive structure - The Trust structure allows Gryphon to invest a permanent and stable pool of capital, while also offering investors ASX liquidity. This allows Gryphon to make long term investment decisions without the need to source liquidity for potential investor redemptions, which may impact return.




Key Features

About the Trust

The Trust seeks to provide Unitholders with monthly income and low risk of capital loss by investing in a portfolio of Australian debt securities including residential mortgage backed securities (RMBS) and asset backed securities (ABS). Since listing on the ASX, the Trust has met or exceeded all targets and has delivered its investors regular monthly cash income above the Trust's Target Return2 and a stable Net Tangible Asset backing (NTA). The Trust provides investors with a means of diversifying their income investments to a defensive fixed income asset class which has displayed little correlation to global equity market's volatility.

Investment philosophy

GCI's investment style is a long-only, deep-credit, research-driven, macro-aware approach using top-down and bottom-up techniques to build portfolios of what it considers to be the best relative-value securities consistent with its client's individual investment parameters.

GCI's investment strategies do not rely on timing' the market. Therefore, when making investment decisions, GCI's investment horizon and that of the Trust assumes the investment will be held until maturity, thus making capital preservation paramount especially through periods of economic turbulence. This philosophy is consistent with GCI's cognitive bias for long only investment strategies which are underpinned by its thorough and timely risk management systems. That said, GCI may still sell the Trust's investments before maturity where it believes it can reinvest capital more effectively elsewhere.

GCI believes the safest passage to long term success comes from the benefits of being a specialist investment manager. GCI's processes require it to establish the charter for each investment strategy in consultation with its clients and then not deviate from the strategy making sure there are no surprises and performance directly mirrors their client's objectives.

Investment Process

The Manager aims to deliver superior investment returns investing in Residential Mortgage Backed Securities (RMBS) and Asset Backed Securities (ABS). The investment process can be broken down into 4 key pillars:

  1. Idea generation - The Manager will meet weekly to evaluate the Portfolio and to discuss the characteristics of assets that would best contribute to Portfolio composition. The Manager will use a comprehensive proprietary database that accesses data feeds directly from originators.
  2. Security selection and research - The Manager will complete a detailed credit assessment for each investment idea considered for the Portfolio. This includes a credit report, deal modelling and security analysis. The Investment Team will also stress test each investment opportunity to project a worst case scenario.
  3. Portfolio construction - The Manager will evaluate the opportunity in the context of an agreed risk budget to deliver the optimal Portfolio composition. Investments that pass the security selection process will not automatically enter the Portfolio, but will be assessed within the context of the Portfolio.
  4. Portfolio management - The Manager will receive regular updated data on all loans within the RMBS collateral pool. These provide dynamic reporting on the current status of each loan in the collateral pool. In addition the performance attribution of each individual security is assessed allowing the Manager to understand precisely how the returns are generated.


How we invest your money

The Trust invests in a diversified portfolio of RMBS and ABS and other Authorised Investments. Once the Manager Loan is repaid the only investments in the Trust will be in RMBS and ABS.

Unlike other more common fixed income investments such as government bonds, the Trust invests in RMBS and ABS. Before making an investment the Manager will often negotiate with an Originator to ensure that the terms of the bond issue meets its robust due diligence standards. This is one of the major reasons why Retail Investors have difficulty accessing the RMBS and ABS markets. The Manager anticipates it will take two-to-three months to deploy funds raised under the Offer. To ensure the Trust will earn income in the period the funds raised under the Offer are being deployed, immediately following the allotment of New Units, the Manager will invest the Offer proceeds in more readily available RMBS and ABS in order to ensure the Trust is earning income on the new funds deployed almost immediately. The Manager will then begin to transition those investments into higher income generating Authorised Investments as opportunities arise.

Asset allocation

(Authorised Investment: Mandate Range / Indicative portfolio)

  • Cash: 0-10% / 1%
  • RMBS (of different credit ratings): 70-100% / 81%
  • ABS (of different credit ratings): 0-30% / 15%

Authorised Investments

The Trust investments may consist of the following:

  1. Cash held in a bank or other ADI.
  2. Short term money market securities or cash equivalent.
  3. RMBS.
  4. Other ABS. That is, non-RMBS which may include securitisations backed by consumer loans, loans to SMEs, auto loans among others.
  5. Manager Loan.

Investment Guidelines

All investments:

  • must be denominated or payable in Australian dollars or denominated in another currency but hedged back to Australian dollars, and
  • other than the Manager Loan, must be fully secured by collateral domiciled in Australia.

Investment concentrations

The Investment Guidelines require the Manager to prudently limit exposures to any individual asset class, issuers and transactions. To support this, the Manager has adopted the following investment restrictions for the Trust:

  1. At least 50% of the Portfolio will be invested in assets with an Investment Grade Rating.
  2. At the time of investment, the maximum holding in any one security will not exceed 10% of the Trust's Portfolio.
  3. At the time of investment, the exposure to any one Originator must not exceed 30% of the Portfolio.
  4. All ABS investments must be rated or credit assessed by one of Standard & Poors, Moodys or FitchRatings.
  5. Non-investment grade ABS must not exceed 15% of the Portfolio.

Subject to the hedging guidelines, a maximum of 20% of the Portfolio may be invested in assets denominated in foreign currencies.