Investment Highlights

• PCX offers investors access to a diversified portfolio of global private credit investments via a listed ASX vehicle.
• The portfolio is primarily allocated to directly originated loans with strong structural protections, supplemented by targeted exposures to structured and opportunistic credit strategies.
• Income generation is a key focus, supported by a disciplined, institutional-grade investment process and independent oversight by Mercer.
• Risk is actively managed through diversification across managers, strategies, borrowers, and sectors, and by maintaining a focus on downside protection.
• The Trust has limited correlation to public markets and aims to offer greater stability through market cycles.

Market Update: Insights from Our US Visit – PCX Well Positioned

This month’s commentary is anchored by the collective insights, concerns, and observations gathered during our recent visit to the United States. We engaged directly with our core managers, leverage providers, institutional allocators, and economists across the US corporate credit ecosystem.

The insights derived from our tour confirm the critical importance of selectivity and structural focus. They have led us to remain highly confident in the Global Private Credit (GPC) asset class and the current positioning of the PCX portfolio as the optimal mechanism for investors to capture the GPC value proposition.

1. Market Commentary – The View from the US Frontline

Our discussions reinforced the three pillars of our investment thesis for global private credit, confirming their central role in generating strong risk-adjusted returns:

2. Market Dynamics: The Problem of Structural Risk and Bifurcation

The consensus among the market participants we met paints a clear picture: achieving defensive private credit returns is increasingly problematic at the large end of the market due to pervasive risk and bifurcation.

Public Markets and the Deployment Pressure

Our discussions repeatedly highlighted the dilemma created by tight public credit spreads (Investment Grade and High Yield) and enormous capital inflows into the large-cap private credit segment. This situation exerts pressure on managers with large deployment targets, forcing them into transactions that are intensely competitive with the Broadly Syndicated Loan (BSL) and Leveraged Loan markets. For highly-rated borrowers, the market is overtly borrower-friendly. This dynamic requires managers to frequently compromise on pricing and protective covenants, effectively taking on uncompensated risk. This compromise in underwriting discipline is viewed by observers as a significant risk factor, a concern already evidenced by performance divergence within the listed Business Development Company (BDC) market (a BDC is a US closed-end vehicle that provides capital, primarily in the form of debt).

The Core Middle Market Solution

In stark contrast, the Core Middle Market, where PCX focuses its investments, is structurally insulated from this large-cap deployment pressure. The consensus is that managers with sufficient scale, long tenure, and proven differentiated origination are able to consistently exploit the market void created by the sustained retreat of commercial banks while also maintaining competitive advantage. This differentiation and scale allow these managers to maintain control over the lending process, resulting in superior pricing and the ability to secure robust downside protection through strong covenants. These managers are also reporting encouraging signs of underlying portfolio health, including growth in revenue and EBITDA. This disciplined, selective approach, unavailable at the large-cap end, is where investors can achieve the defensive returns expected from direct lending.

3. The Strategic Opportunity: Relative Value Through Selectivity

The market’s failure to efficiently price risk creates a secondary, high-conviction opportunity in Opportunistic Credit.

This consensus view confirms that opportunity arises from fundamentally sound businesses that are currently unloved or unable to secure liquidity due to market strains. These are companies struggling with specific issues, such as suboptimal balance sheet structures, idiosyncratic funding challenges, or limited liquidity, not poor underlying operational performance.

The insight gathered is that there is a distinct lack of competing capital for these specialised situations. For the best Credit Opportunities managers, this translates into an ability to selectively deploy capital at excellent risk-adjusted returns. By providing tailored financing solutions, these managers generate significant relative value compared to the core lending market. This allocation is crucial to capturing the high-return value created by prevailing market inefficiencies and structural dislocation.

4. PCX Positioning: Strategy Validated

The insights and concerns raised by the market participants we met, spanning everything from tight public market spreads to the risk inherent in large-cap deployment, have led to a high degree of comfort and confidence in the PCX strategy.

Our key takeaway is that the PCX structure is ideally positioned to mitigate the identified risks and capture the confirmed opportunities:

• Mitigating Risk: We manage the risk of the large-end dilemma by focusing deployment on Core Middle Market managers with proven origination and structural discipline.
• Capturing Opportunity: We enhance returns and portfolio breadth by capturing relative value through highly selective exposure to best-in-class Opportunistic Credit managers; and
• Structural Advantage: This strategy is delivered through a fund-of-funds structure that provides institutional-grade diversification (manager, geography, and strategy) and manager due diligence, ensuring the resilience required in this uncertain environment.

The insights derived from our tour confirm that the way we are positioned and the managers we have selected are the best way to capture the Global Private Credit opportunity. We are confident that PCX’s positioning will continue to deliver the GPC value proposition, focused on stable income and resilient returns.

Portfolio Update³

Strong diversification leads to stable returns.

The November cum-NAV per unit remained stable at $2.01. During the month, we received the majority of our underlying fund investor statements for Q3. The returns were positive and generally above target, with the balance of the Q3 investor statements expected to arrive in December. The Trust declared a 1.3c dividend for November, in excess of our target minimum and in line with the recent trend.

The funds from the recent capital raising have been fully deployed during November, with no dilutive impact on Trust returns.

At 30 November, the Trust has maintained its target allocation mix, with capital diversified across fund types and managers as follows:

• Income: $132.6m invested across 9 managers
• Balanced: $42.0m invested across 5 managers
• Total Return: $42.8m invested across 11 managers

Following deployment of the capital raising funds, the portfolio remains within stated limits across geography, seniority, and investment strategy. Diversification by vintage, style, and manager continues to underpin downside protection and liquidity planning.

Our underlying fund managers focus on providing credit to corporates operating within defensive, non-cyclical industries such as Financials, Industrials, Information Technology, and Health Care. These 4 sectors account for 69% of the total Trust exposure. Exposure to the Real Estate sector accounts for less than 3% of the total Trust exposure.