Investing with Gryphon Capital
“We’ve got to use every piece of data and piece of information, and hopefully that will help us be accurate with our player evaluation. For us, that’s our life blood.” – Billy Beane, GM of Oakland A’s, Subject of Moneyball
GCI’s investable universe include Asset-backed securities (ABS) which finance pools of familiar asset types, such as residential mortgages, auto loans and credit card receivables, among other asset types. All debt in which GCI invests is secured by a defined pool of assets.
ABS have many investor friendly features that may protect against loss and improve liquidity, such as borrowers equity, tranching, overcollateralisation and reserve funds. Despite these protections ABS continue to offer higher yields than similarly rated unsecured corporate bonds. This is due to a combination of the complexity of ABS and the liquidity premia compared to corporate issuance.The Gryphon Capital Income Trust (“Trust”) is a ASX-Listed Trust providing Unitholders with exposure to the Australian securitised fixed income market, a large market (> A$100 billion) which is dominated by institutional investors. The investment objective of the Trust is to generate attractive risk adjusted returns principally through monthly income distributions with a low risk of capital loss.Investment Strategy.
ABS are issued by financial institutions including major banks, regional banks and non-banks as a treasury funding tool and in some instances are also issued for Capital Relief purposes. It is an institutional market with investors including banks, insurance companies, super funds and institutional investment managers.
ABS have historically provided higher investment returns than traditional fixed income instructions for a comparable credit rating. Some of this yield premium is explained by complexity risk of the ABS.
ABS enable investors to gain exposure to a known pool of assets (i.e. residential mortgages) and are structured to provide attractive defensive risk characteristics.
Return and risk characteristics for ABS vary widely depending on the combination of originator underwriting standards, underlying assets, capital structure, bond credit ratings and quality of servicing meaning the investors are typically institutional and often specialist ABS investors like GCI.