A: The MCP Master Income Trust (ASX: MXT) invests in corporate loans from investment and non-investment grade borrowers. It targets a diversified mix of borrowers from different sectors, industries, investment terms and credit profiles. Most of the loans are to Australian borrowers. Currently, the portfolio comprises 140 loans.

 

The portfolio is actively managed. It targets a return to investors of the RBA cash rate plus 3.25% (current total 4.0%), with distributions paid monthly.

 

I would categorise an investment in this listed Trust as part of my “risky fixed interest” portfolio. Provided you understand the risks, I am ok with investing in this type of product with the following important caveats. Firstly, it wouldn’t be my only investment in this category (there is in Manager risk); and secondly; be cognizant that spreads between non-investment grade bonds/loans relative to government bonds are at record lows due to investors chasing yield.

 

In relation to the particular offer, it is a 1 for 2 entitlement offer (plus a shortfall offer) to raise approx. $638m. It is at $2.00 per unit – the most recent NTA (net tangible asset value) was very fractionally higher at $2.007. The offer closes on 6 March.