Pengana International Equities, the listed investment company capitalised at $318 million on the ASX, has stoked the anger of an influential investor with its attempt to sprinkle private credit in the mix.
The proposal, which Pengana has pitched as a solution to solve the gap between the LIC’s traded price and the underlying value, has spurred Geoff Wilson into action. His Wilson Asset Management Group owns units in the LIC via its Strategic Value fund.
“I’m very disappointed with the board of Pengana International Equities in seeking to change the investment mandate,” Wilson told this column. “Ever since Pengana has taken over from Hunter Hall, they’ve failed to deliver for shareholders.”
The plan, first revealed by Street Talk, involves the Pengana LIC taking out a loan from an international bank and investing the proceeds in a portfolio of 23 private credit managers (and their 3000 associated loans to mid-market companies) in a fund-of-funds managed by Mercer.
It’s worth noting that WAM only holds 8.45 per cent of this LIC and will need to rally more investors to its cause if it hopes to block the proposal at the October annual general meeting. The vote will require more than 50 per cent shareholder approval. It’s understood Wilson has hit the phones to build support for his case.
Soul Patts should stick by Pengana, given that it put up about $200 million in seed funding to help Pengana establish a portfolio of private credit investments in 2023. It’s also a major shareholder in Pengana Capital Group.
Major pivot
The main criticism of Pengana’s plan is that it will alter the risk profile of the fund by gearing up to invest in private debt, driving its investors to hold a hybrid equity-and-debt position. Some would prefer for the LIC to be converted into an open-ended fund to allow investors to exit at the net asset value.
However, shares in the LIC jumped 4 per cent since the announcement, a sign that there are those who back the proposal or welcome the fact Pengana is making moves to close the discount.
But PIA isn’t the only front Wilson is fighting on. At Platinum’s international equity LIC, the veteran stockpicker is going up against L1 Capital to gain control of the $450 million fund, putting up his three directors for election. Could he try to pull the same stunt at PIA?
Wilson has also brought a LIC with equity and debt elements, dubbed Income Maximiser, to market this year.
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