Gryphon Capital Investments has raised $175.3 million in a new listed investment company, the Gryphon Capital Income Trust (GCI), that will invest in a diversified portfolio of fixed income bonds. The LIC began trading on the ASX on 25 May, 2018.
The trust's target return is the RBA cash rate plus 3.5% per annum, net of fees, through the economic cycle. Based on the current RBA cash rate of 1.5%, the initial target return will be 5% per annum (net of fees).
The Gryphon Capital Income Trust reflects the key tenets of Gryphon Capital's investment philosophy of capital preservation and superior risk adjusted returns. "The target net return is underpinned by the multiple layers of protection afforded to them by investing in a diversified portfolio of secured bonds," Gryphon Capital co-founder and chief executive officer, Steven Fleming, says.
The trust will offer exposure to a diversified portfolio of asset backed securities and will seek to exploit market anomalies to maximise the risk-adjusted return to the portfolio.
Gryphon Capital has a proprietary database, which collates detailed information on 114,984 residential loans and 1,129 Australian RMBS securities (as at 21 December 2017). "Gryphon Capital believes this gives it a rich source of information about the performance of the collateral supporting its investments, and provides it with a competitive advantage over its peers in assessing and pricing risk in the markets in which it invests," Fleming says.
This type of investment fits well as a proportion of all investors' portfolios, however, Gryphon says it would particularly suit investors seeking regular income, who are concerned about capital risk.
This includes investors at, or nearing, retirement, investors with high cash balances in term deposits, and investors in other relatively lower yield fixed income products which may be exposed to interest rate risk.
"We also think this type of investment might suit not-for-profit organisations and foundations seeking regular income and stability of capital," Fleming says.