| M&G Credit Income Investment Trust plc (MGCI) LEI: 549300E9W63X1E5A3N24
M&G Credit Income Investment Trust plc Half Year Report and unaudited Condensed Financial Statements for the six months ended 30 June 2025
The full version of the Half Year Report and unaudited Condensed Financial Statements can be obtained from the following website: www.mandg.co.uk/creditincomeinvestmenttrust
Chairman’s statement Performance Your Company delivered a NAV total return of +2.97% for the six months to 30 June 2025, underperforming the benchmark of SONIA +4%, which returned +4.26%. Comparable investment grade fixed income indices such as the ICE BofA Sterling Corporate and Collateralized Index and the ICE BofA 1-3 Year BBB Sterling Corporate & Collateralized Index returned +3.48% and +3.54% respectively. The Company’s NAV total return compared favourably to high yield indices such as the ICE BofA European Currency Non-Financial High Yield 2% Constrained Index (+2.84%). The Investment Manager kept the portfolio defensively positioned throughout the half year because it believed, and continues to believe, that credit spreads (which are close to historic lows) are not compensating investors for longer term corporate risk. Credit spreads began and ended the period at roughly the same level although there was a brief period in March and early April which saw spreads widen, as financial markets digested tariff implications and braced for a global trade war. Shortly thereafter, markets rallied on the announcement of tariff suspensions, and credit spreads narrowed again. At times of tight credit spreads, the defensive positioning of the portfolio can be expected to result in a shortfall against the benchmark unless and until there is sufficient market volatility to enable our Investment Manager to create compensating capital gains. The brief period of credit spread widening in the middle of the period under review was helpful but was not long enough to make a material difference. In addition, there was underperformance from negative developments in two private credits which are described in more detail in the Investment Manager’s Report. Share issuance and discount management During the half year, your Company increased its market capitalisation by over £31 million as sustained demand for share issuance continued to support its growth. This helps to improve liquidity in your Company’s shares as well as reducing the ongoing charges ratio. Share issuance at an appropriate premium to NAV underpins the Zero Discount Policy which seeks to ensure that Ordinary Shares trade close to NAV in normal market conditions. In March, the Company issued 6,647,969 new Ordinary Shares via a placing and retail offer, whilst an additional 26,950,000 new Ordinary Shares were sold through regular tap issues over the period to 30 June 2025. This was facilitated by the renewal of the relevant shareholder issuance authorities at a General Meeting held in February 2025. However, the continued pace of investor demand for shares meant that by May it had become evident that the Company’s capacity to issue Ordinary Shares to meet market demand and to maintain the Zero Discount Policy under the existing authorities would soon be exhausted. The Company therefore published a new Prospectus in order for share issuance to continue. Authority was approved by shareholder vote at a General Meeting held on 28 July 2025, for the capacity to issue up to 150 million Ordinary Shares for a period of 12 months. Issues of Ordinary Shares are made at a price not less than the latest published NAV together with a premium intended to cover the costs of the relevant issue and to contribute to the costs of publishing the Prospectus mentioned above. The Company’s Ordinary Share price traded at an average premium to NAV of 1.8% during the period ended 30 June 2025. On 30 June 2025 the Ordinary Share price was 95.9p, representing a 2.2% premium to NAV as at that date. Since the period end, a further 10,750,000 Ordinary Shares have been issued. Dividends Your Company is currently paying four, quarterly interim dividends at an annual rate of SONIA +4%, calculated by reference to the adjusted opening NAV as at 1 January 2025. The Company paid dividends of 1.96p and 1.92p per Ordinary Share respectively for the quarters to 31 March 2025 and 30 June 2025. Your Company’s Investment Manager continues to believe that an annual total return, and thus ultimately a dividend yield, of SONIA +4% will continue to be achievable although there can be no guarantee that this will occur in any individual year. Outlook Financial markets have calmed since the turmoil of early April, but tariff uncertainty remains. In spite of this, investors currently seem to be shrugging off the associated chaos and headlines. US and UK equity markets have recently reached record highs whilst sterling investment-grade credit spreads hover around multi-decade lows, reflecting investors’ strong appetite for risk. Widespread fears about an inflation surge driven by tariffs have yet to materialise, although it will take some time for the effects to work through what is a highly complex and interconnected global trade system. Many commentators believe that current levels of market exuberance are unlikely to last. Elevated levels of uncertainty create challenge but also opportunity. The Investment Manager feels it is now more important than ever to remain patient and disciplined in its investment approach, and at current valuations will continue to keep the portfolio defensively positioned, prioritising credit quality over yield. It has constructed a portfolio that it expects to be able to withstand wider market volatility but one which can be rapidly reshaped to take advantage of any such volatility when the opportunity presents itself. This forms one of the core pillars of the Company’s investment strategy, which is for the Investment Manager to seek to trade the liquid, public portion of the portfolio in order to generate gains which should contribute to the return target of SONIA +4%. Your Company has access to an undrawn £25 million credit facility and has a further £39 million invested in high credit quality, daily dealing ABS funds, ready to be reallocated when the market conditions for adding risk materialise.
David Simpson Chairman 16 September 2025
Financial highlights
Key data
Return and dividends per Ordinary Share
a Alternative performance measure. Please see pages 33 to 34 in the full Half Year Report for further information.
b The total dividends declared in respect of each period equated to a dividend yield of SONIA +4% on the adjusted opening NAV.
Investment manager’s report Going into 2025, the global economic outlook was initially positive, but proposals for broad trade tariffs by the new US administration brought about significant economic uncertainty. Despite moderating, inflation in major economies remained above central bank targets, whilst economic growth slowed considerably which reflected the impact of uncertain global trade policies and fluctuating market conditions. Tariff related volatility peaked in April as global markets were roiled by harsher than anticipated reciprocal tariffs which led to fears of a global recession. This sparked significant volatility resulting in a widening in credit spreads which, although short-lived, presented us with an opportunity to re-engage more meaningfully with the public bond market. We focussed our attention on purchasing investment-grade UK names with little to no direct exposure to tariff risk, deploying £3 million during what was ultimately a very brief window of opportunity. Characterising the unpredictability of policymaking under the new Trump administration, a week later the announcement of a 90-day suspension of the reciprocal tariffs catalysed a pronounced recovery which saw credit spreads round-trip to return to pre-April levels, ending the half-year approximately in line with where they started it. Despite the temporary, tariff-induced spread weakness, the technical backdrop in fixed income remained robust. The combination of relatively high bond yields, a benign outlook for inflation, and the likelihood of lower interest rates ahead, remains appealing to both income and total return investors, which continues to attract capital to the asset class. As a result, demand for corporate bonds is significantly exceeding supply which is keeping volatility contained and credit spreads well-anchored with a bias to becoming tighter. Having come into the year defensively positioned (as we have been for some time on relative value concerns), our primary focus remained on deploying capital into private assets, investing £19 million across 13 new and existing facilities during the period. We continued to find attractive relative value in Regulatory Capital transactions. Additionally, as the Company raised capital via the issue of new Ordinary Shares (as detailed in the Chairman’s Statement), we invested some of the proceeds into the M&G European Loan Fund, a cornerstone investment of the portfolio since launch, to prevent dilution of our existing exposure. We were also pleased to close two investment grade transactions in parts of the private market where we are often less active due to tighter pricing; the first, an infrastructure transaction providing senior debt in an Italian road PPP (Public-Private Partnership) project and the second, a senior secured Private Placement transaction backed by future payments from wireless spectrum licenses. Other private transactions saw us allocate additional capital to existing securitisations in the portfolio. During the period there were notable valuation adjustments to loans from two different private issuers as a result of internal credit rating downgrades, which have been reflected in the Company’s latest published NAV. The first credit is undergoing a business restructuring in response to significant (and unforeseen) changes in its target market/operating environment. The second credit has encountered a short term cash flow problem, which is expected to rectify over the medium term, but which has seen the sponsor commit additional equity to the business. We actively monitor the portfolio for signs of distress and currently have exposure to three issuers, amounting to 0.69% of the latest published NAV, which are either in technical default or at some stage of a restructuring process. These assets are already marked-to-market or, in respect of non-public market instruments, reserved against in your Company’s latest published NAV. The funded private asset portion of the portfolio decreased over the period to 49.66% (versus 52.38% at 31 December 2024) which was largely due to cash received from share issuance outpacing private pipeline deal execution. We continued to deploy proceeds into AA-rated M&G Investment Grade ABS Fund whilst waiting for a number of private transactions to progress to funding later in the year. The portfolio also still has approximately 8% invested in illiquid publicly-listed assets, which are intended to be held to maturity. The portfolio’s investment grade holdings increased during the period (78% from 76% previously) relative to sub-investment grade (22% from 24% previously) reflecting our preference for going up in credit quality rather than adding risk. Outlook The biggest cost of the tariff war on the global economy may well be the impact of the uncertainty created rather than the direct impact of the tariffs themselves. A confluence of additional risks also weighs on the outlook for the remainder of the year, including (but not limited to) upward pressure on inflation, high geopolitical and conflict risk, rising bond yield term premia, the impacts of fiscal and broader policy dynamics, and the sustainability of the Artificial Intelligence 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. At the time of writing, credit spreads are at almost 20-year lows, with BBB credit (the lowest rung of investment grade) offering barely 100 basis points additional return over sovereign benchmark yields.
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 generating what we feel are the most 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. When further market volatility gives rise to attractive opportunities, we have access to a £25 million credit facility and a further £39 million invested in two AAA/AA-rated, daily dealing ABS funds, ready to be reallocated.
M&G Alternatives Investment Management Limited 16 September 2025
Portfolio analysis
Portfolio overview
Source: State Street
Geographical exposure
* Excluding cash on deposit and derivatives.
Source: M&G and State Street as at 30 June 2025
Credit rating breakdown
Source: State Street
Note: ELF is an open-ended fund managed by M&G that invests in leveraged loans issued by, generally, substantial private companies located in the UK and Continental Europe. ELF is not rated and the Investment Manager has determined an implied rating for this investment, utilising rating methodologies typically attributable to collateralised loan obligations. On this basis, 78% of the Company’s investment in ELF has been ascribed as being investment grade, and 22% has been ascribed as being sub-investment grade. The board actively monitors the implied rating to ensure that the original rating remains appropriate.
Top 20 holdings
a Including cash on deposit and derivatives.
Further Information The full Half Year Report and unaudited Condensed Financial Statements can be obtained from the Company's website at www.mandg.co.uk/creditincomeinvestmenttrust or by contacting the Company Secretary at [email protected]m.
It has also been submitted in full unedited text to the Financial Conduct Authority's National Storage Mechanism and is available for inspection at data.fca.org.uk/#/nsm/nationalstoragemechanism in accordance with DTR 6.3.5(1A) of the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.
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: | IR |
| TIDM: | MGCI |
| LEI Code: | 549300E9W63X1E5A3N24 |
| OAM Categories: | 1.2. Half yearly financial reports and audit reports/limited reviews |
| Sequence No.: | 401994 |
| EQS News ID: | 2198354 |
| End of Announcement | EQS News Service |
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