In a first for Australia’s financial services landscape, global law firm DLA Piper has advised funds management group Pengana Capital Group Ltd (ASX:PCG) (Pengana) and its subsidiary Pengana Credit Pty Ltd (Pengana Credit) on the structuring and launch of the innovative retail TermPlus fund (ARSN 668 902 323) (TermPlus). TermPlus is able to offer retail investors monthly income in line with a market leading target rate of up to 8.50% p.a. by democratising “highly sought after” global private credit investment opportunities.
The DLA Piper team was led by Martin Jamieson, Partner within DLA Piper’s Australian Investment Management, Funds, Superannuation and Financial Services Regulatory practice, and principally assisted by Timothy Lou (Senior Associate) and Edwin Kwok (Senior Associate). Eddie Ahn (Partner, tax) and Jun Au (Senior Associate) also advised on TermPlus.
TermPlus accounts are not bank-deposits and do not have the benefit of a government guarantee. Instead, TermPlus has been designed to have 3 distinct built-in layers of protection to attract investors. These built-in layers of protection are underpinned by a ‘Support Account’ class investment from Pengana. The first layer of protection for TermPlus account holders takes the form of a ‘priority income entitlement’ to the return of TermPlus before any return is paid to Pengana’s investment in the Support Account. The second layer of protection takes the form of a ‘savings support’ feature which seeks to reduce the potential for loss on an invested amount, funded from the Support Account. The third layer of protection (which is unique to TermPlus in the Australian market) takes the form of ‘income stabilisation’ whereupon the accrual of income is insulated from fluctuations in term account values. Nehemiah Richardson, CEO and Managing Director of Pengana Credit stated, ‘DLA Piper worked very hard with the commercial team to refine the 3 layers of protection to be attractive to our target investors. TermPlus is one of the first funds in the Australian market to have these features, over and above an already appealing term account offering.’
TermPlus also provides for Pengana the potential to receive an innovative return in respect of this product. Pengana does not receive any management fee or performance fee and solely receives a class right to returns derived in excess of the targeted return. As Pengana’s return is derived through its investment in the Support Account of TermPlus, and with TermPlus account holders having a priority entitlement to the support account to underpin returns and capital, Pengana has taken a truly customer-first approach whereby it will only receive any return once account holders are delivered their full expected outcomes.
Further, unlike any other private credit unit trust on the market today, the TermPlus product uniquely offers an intuitively custom-designed and purpose-built retail investor experience whilst remaining at law a unit trust. Each investor’s term account is a single unit initially equal in value to the amount that each investor invests in the term account. Johanna Moore, General Counsel of Pengana stated, ‘DLA Piper’s groundbreaking deployment of the notional unit feature makes TermPlus a very attractive fundraising vehicle for retail investors as compared to a vanilla unit trust registered as a managed investment scheme.’
TermPlus achieves its economic exposure to global private credit assets via investments in a hedged class of Profit Participating Notes (PPNs) issued by the Pengana Private Credit Feeder Fund (Feeder Fund, which is structured as a Cayman Islands company). The Feeder Fund in turn invests in classes of shares issued by the Pengana Private Credit Master Fund (Master Fund, which is also structured as a Cayman Islands company). The Master Fund then invests in underlying funds managed by professional private credit fund managers. This offshore fund infrastructure provides Pengana with an efficient, flexible and scalable platform on which to launch TermPlus and future global private credit offerings to a variety of Australian clientele. DLA Piper also assisted with the structuring and launch of this offshore investment platform.
TermPlus is one of 3 Australian feeders DLA Piper have a set up for Pengana that are investing into Pengana’s global private credit Cayman fund infrastructure.
