Pengana Plans Global Private Credit Boost, Targets 56% Dividend Rise

A Strategic Shift Towards Diversification

Pengana International Equities Limited (PIA) has announced a significant proposal to enhance its portfolio by incorporating global private credit exposure. This move aims to diversify the company’s assets beyond its existing global equity holdings, providing shareholders with a more reliable income stream and potential for capital growth.

The proposed global private credit portfolio will be funded through a loan secured against PIA’s current equity portfolio, ensuring that the size of the global equity exposure remains unchanged. This approach allows Pengana to tap into a new asset class without diluting its existing investments.

What is Global Private Credit?

Global private credit involves loans made directly to mid-market companies or asset owners, typically secured and held to maturity rather than traded on secondary markets. This structure fosters strong alignment between lenders and borrowers, with rigorous risk assessment and ongoing monitoring. Pengana’s private credit portfolio will be managed by Pengana Capital Group (PCG) with consultancy support from Mercer, a globally recognized expert in private credit investing.

The portfolio will be diversified across geographies, sectors, and credit strategies, avoiding concentration risks common in Australian private credit products, such as heavy commercial real estate exposure. It will include over 3,500 mid-market companies, primarily in the US and Europe.

Financial Implications and Dividend Enhancements

PIA targets a return from the private credit investment of 4.5% per annum above the cost of debt. To mitigate risk, PCG has committed to covering any shortfall if returns do not meet the loan costs, sharing in returns only when they exceed this target.

This new income stream is expected to boost underlying earnings per share, enabling the board to propose a 56% increase in fully franked dividends to 8.4 cents per share annually. Based on the July 2025 share price, this translates to a gross dividend yield of 8.9% per annum. Notably, PIA will transition to monthly dividend payments starting November 2025, enhancing cash flow predictability for investors.

Next Steps and Shareholder Engagement

The proposal remains subject to final approvals from both PIA and PCG boards, completion of transaction documentation, financing arrangements, receipt of an independent expert’s report, and crucially, shareholder approval at the upcoming Annual General Meeting on 10 October 2025.

Pengana is inviting shareholders to a detailed webinar and Q&A session on 4 September 2025 to discuss the proposal and its implications. This engagement underscores the company’s commitment to transparency and shareholder value.

Overall, Pengana’s initiative represents a thoughtful response to the evolving investment landscape, where traditional income sources face challenges amid falling deposit rates and the phasing out of bank hybrids. By blending global equities with private credit, PIA aims to offer a unique, diversified investment vehicle with enhanced income reliability and growth potential.