Pengana International Equities Fund proposes restructured offering amidst changing needs of investors, announces plan to boost income returns for shareholders

Russel Pillemer

The $374 million Listed Investment Company, Pengana International Equities Fund (ASX: PIA), has announced a proposal to boost shareholders’ income returns via a new structured global private credit exposure targeting a 56% increase to PIA’s fully franked dividends.

Dividends will also be paid monthly rather than quarterly under the proposal, which the board is pleased to put to PIA shareholders for their consideration at PIA’s Annual General Meeting on 10 October 2025.

Pengana said the proposed changes are unprecedented, and would deliver additional predictable income to enhance PIA’s earnings-per-share. Pengana forecasts fully franked dividends would increase to a targeted 8.4c per share, equal to total dividend yield of 8.9% (when accounting for franking credits) at the 31 July share price.

Once fully implemented PIA’s assets will comprise the current portfolio of listed global equities (~70%) and a diversified allocation to highly rated global private credit (~30%). The global private credit portfolio managed by Pengana Credit (who appointed Mercer as its investment consultant) will allocate to a well-diversified portfolio of US and European private credit managers, with long term track records, and total exposure to more than 3,500 underlying mid-market corporate loans.

PIA’s allocation to global private credit will be funded by a relatively low-cost secured revolving debt facility over the global equity portfolio. Pengana Capital Group will cover the shortfall, should the returns from the global credit portfolio be insufficient to meet the cost of the debt facility..

Russel Pillemer, CEO at Pengana Capital Group, said combining global equities with global private credit was a first for the LIC sector and provides investors a high-quality hybrid-like income alternative. “This could be considered a new type of hybrid, which takes the opportunity to enhance fully franked dividend returns with global private credit.

“Equities and global private credit can complement each other perfectly, with global private credit adding an important unlisted investment component to the offering, which allows us to boost the income returns available to PIA shareholders.

“The yield from global private credit is uncorrelated to any changes in local interest rates, which is also attractive to investors seeking stability in yield, and even more so in a reducing interest rate environment.

“We can offer this advantage due to the closed-end nature of the LIC structure, which enables efficient investments into illiquid asset classes such as global private credit”, Mr Pillemer said.

Mr Pillemer said PIA’s income improvements help address a growing structural requirement for defensive income producing investments among Australian investors. “More Australians are exiting accumulation and entering transition-to-retirement, and need investments with strong capital preservation characteristics.

“There is also a growing need for hybrid investors to find a reliable and meaningful replacement for their investments.

“Many traditional Australian dividend and income sources are exposed to similar economic forces. This lack of diversification means they can all fall in value at the same time.

“PIA plans to address these issues via global private credit, which is defensive in nature and provides a significant boost to income returns, that can also be reinvested for compounding benefits”, Pillemer said.

In summary:

• PIA will add a structured global private credit exposure, targeting a fully franked dividend increase of 56 per cent for shareholders.
• The enhanced return will allow PIA to target a gross yield (including franking credits) of 8.9% based on the 31 July 2025 share price of $1.255, or 8.0% based on 31 July 2025 post-tax NAV.
• PIA will deliver more consistent cash flow for investors, shifting to monthly dividend payments.
• PIA will fund its global private credit allocation via a relatively low-cost secured revolving debt facility. Pengana Capital Group covers the shortfall, should the returns from the global credit portfolio be insufficient to meet the cost of the debt facility.