REG-M&G Credit Income Investment Trust plc Quarterly Review

M&G Credit Income Investment TrustAnnouncement

05/11/2025 10:00

============

M&G Credit Income Investment Trust plc (MGCI)
Quarterly Review

05-Nov-2025 / 09:52 GMT/BST

════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════

 

M&G CREDIT INCOME INVESTMENT TRUST PLC

 

(the “Company”)

 

LEI: 549300E9W63X1E5A3N24

 

Quarterly Review

 

The Company announces that its quarterly review as at 30  September 2025 is now available, a summary of which is  provided below. The full quarterly review is available on  the
Company’s website at:

 

 1 https://www.mandg.com/dam/investments/common/gb/en/documents/funds-literature/credit-income-investment-trust/mandg_credit-income-investment-trust_quarterly-review_gb_eng.pdf

 

 

Market Review

 

The third quarter was largely a positive  period for financial markets. Global stock  markets continued to recover from the  tariff-induced sell-off in April as trade  tensions
subsided, with gains also fuelled  by strong corporate earnings,  anticipation of Federal Reserve rate  cuts, and continued enthusiasm  around Artificial Intelligence (AI)  and
technology innovation. Bond market performance was  more modest, with concerns about inflation  and fiscal positions weighing on sentiment,  particularly in Europe. In July,  a
month’s delay in tariff implementation improved the mood music and preceded the eventual announcement of a series of bilateral trade agreements between the US and key partners.
Deals with the EU, Japan, and South Korea helped calm uncertainty, with rates that were lower than originally announced, aiding risk assets to stabilise. However, the potential
impact of US trade tariffs on  the global economy remained a dominant  theme for investors. Although there  was little evidence of a tariff  effect on economic data, as  global
growth remained broadly  resilient, volatility  remained a persistent  undercurrent in  markets, with investors  weighing a  range of unresolved  macro risks  and trade  policy
remaining a key source of uncertainty.

 

A disappointing US employment report in August showed virtually no net job growth even as inflation nudged slightly higher, which stoked fears of an economic slowdown. However,
Federal Reserve (Fed) Chair Powell used a dovish speech at Jackson Hole to set the scene for the first Fed rate reduction of 2025, which duly arrived when the FOMC delivered  a
0.25% cut at its September meeting.  In the Eurozone, inflation hovered  right around the ECB’s 2%  target, allowing policymakers to pause  further easing with a hawkish  bias.
Growth indicators remained tepid, underscoring a ‘flat but not collapsing’ economy. The United Kingdom  saw inflation hold at a painful 3.8% – the highest among G7 economies  –
which forced the Bank of England to hold off on more rate cuts after its summer easing. The MPC emphasized the difficult balancing act being faced, that while the UK economy is
fragile (with very slow growth and rising unemployment), inflation remains far above target.

 

Manager Commentary

 

In the third quarter of the year the Company delivered a NAV total return  of +1.85% compared to the +2.05% returned by the benchmark. Underperformance was driven by  defensive
positioning in the  portfolio which  has meant foregoing  yield in  the short term  as we  await for market  conditions to  present, what in  our opinion,  are more  attractive
opportunities to add risk.
 

During the quarter we continued to see sustained demand for share issuance, with the Company’s market capitalisation increasing by c.£10.7m. We added £8m to our exposure in the
M&G Investment Grade ABS (IGABS) fund given  its attractive risk-return characteristics and our  desire to go up in credit quality.  By way of comparison, the IGABS  underlying
portfolio has an average credit rating of AA and has offered a yield of 5.70%, which screens favourably to the majority of the sterling BBB corporate universe where yields have
averaged approximately 5.5% for taking on notably more risk.

 

We invested selectively in new issues where there was still what we considered to be a ‘decent’ spread on offer (within the relative context of currently very expensive  credit
markets). We participated in both the Ford Motor euro (€0.8m) and sterling (£0.9m) new issues which printed at G+200bps for BBB- risk and the senior preferred bond from  Finish
bank Oma Saastopankki (£0.6m) which printed at EURIBOR+230bps for BBB risk. We also invested (£0.8m) in the new secured bond from Southern Water which printed at the wider  end
of recent investment grade new  issues at G+270bps. Despite  the well publicised ongoing  issues in the sector, the  company retains strong equity  backing and there have  been
recent positive political and regulatory developments which are fundamentally constructive for the longer term sector outlook.

 

In the private market we deployed £4.2m  over the quarter. This included £0.7m in  the latest tranche from an existing microfinance  borrower, £1m invested in a senior  secured
term loan to a UK-based IFA  platform, and £1m in a senior  secured term loan issued by a  global leader of air pollution control  and noise abatement solutions. We also  added
£1.5m to our position in SALIS 2019-1 (A) via an internal purchase from another M&G fund, making it one of the largest positions in the portfolio (£2.8m / 1.6% of NAV). This is
a Regulatory Capital deal for a credit linked note backed by  a diversified portfolio of UK SME loans. We’ve held a position  in the portfolio for a number of years and it  has
performed very well, hitting our ‘sweet spot’ in terms of risk-return – offering an implied spread of +420bps for (internally rated) BBB+ risk.

 

Outlook

 

In the immediate term,  the largest and most  persistent impact of the  tariff war on the  global economy has been  the creation of uncertainty  and lasting damage to  business
confidence. Longer term effects remain hard to quantify and will take time to  ripple through the global economy. Significantly, a confluence of additional risks also weigh  on
the outlook for the remainder  of the year, including  (but not limited to)  upward pressure on inflation, geopolitical  and conflict risk, rising  bond yield term premia,  the
impacts of fiscal and broader policy dynamics, and the sustainability of the AI 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. Credit spreads tightened
even further over the prior quarter and at time of writing are at almost 20-year lows. BBB credit (the lowest rung of investment grade) currently offers barely 100 basis points
additional return over sovereign benchmark yields. Tight  credit spreads have been a persistent  theme throughout much of the year  and we maintain that such levels  underprice
corporate risk and are not  adequately accounting for potential  market stress. At this  stage of the economic cycle  we aren’t attempting to  make bold predictions around  the
direction of the global economy or specific outcomes – but what we are saying is that despite overall corporate fundamentals remaining stable, razor-thin credit spreads offer a
low premium for taking on risk, making the market vulnerable to sharp corrections from economic or geopolitical shocks. We don’t necessarily know what the catalyst for a  wider
market repricing will be, but we do know from experience that it’s a matter of ‘when’ and not ‘if’. Adding risk when it is expensive to do so can significantly erode  long-term
portfolio gains, and it is therefore essential to resist overexuberance and herd mentality, focussing instead on credit fundamentals and rational, long-term value.

 

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 helping to generate what we feel are 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. Should further  market
volatility give rise to attractive opportunities,  we have access to a  £40 million credit facility and  a further £44 million invested  in two AAA/AA-rated, daily dealing  ABS
funds, ready to be reallocated.

 

MUFG Corporate Governance Limited

Company Secretary

 

5 November 2025

 

 

 

- ENDS -

 

 

 

 

 

The content of the Company’s web-pages and the content of  any website or pages which may be accessed through  hyperlinks on the Company’s web-pages, other than the content  of
the Update referred to above, is neither incorporated into nor forms part of the above announcement.

 

For             further             information              in             relation              to             the              Company             please              visit:
 2 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: MSCL
   TIDM:          MGCI
   LEI Code:      549300E9W63X1E5A3N24
   Sequence No.:  407273
   EQS News ID:   2224234


    
   End of Announcement EQS News Service

   ══════════════════════════════════════════════════════════════════════════

References

   Visible links
   1. https://urldefense.com/v3/__https:/www.mandg.com/dam/investments/common/gb/en/documents/funds-literature/credit-income-investment-trust/mandg_credit-income-investment-trust_quarterly-review_gb_eng.pdf__;!!GEb1pAs!GFzq0thLxECOYf7cYfU-cwbV6i4x2Tfjju4qfXHeK5dsQCLmBPoZaydiPdYhHsDSOhQdQx_qXx4ok4ANQU-eMmdw5ueXM5M$
   2. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=b46860d1c0b94f61816d77defb50a70b&application_id=2224234&site_id=refinitiv~~~456f380e-074c-434c-ab61-d8ca972fa0de&application_name=news


============