Monthly Income Exceeds Target Return
Gryphon Capital Income Trust (ASX: GCI) continued to exceed its target return during FY25. The Trust distributed a total return of 8.50%, outperforming the RBA cash rate by 4.17%. Since its IPO in May 2018, GCI has outpaced its target of RBA cash rate plus 3.50% per annum. The Trust has delivered consistent monthly income and has proven reliable through several market cycles.
Gryphon Capital Income Trust distributed a total return of 8.50%
Resilience Through Market Volatility
Gryphon has maintained stable net tangible asset (NTA) performance. It has distributed income consistently despite major global events. These include COVID-19, Russia’s war in Ukraine, US bank collapses, Credit Suisse’s bailout, and several natural disasters. The Trust’s resilience stems from Gryphon’s investment model, which uses loan-level data and monthly insights to assess risk.
Investment Objectives Remain Unchanged
GCI’s objectives remain focused on monthly income, capital preservation, and high risk-adjusted returns. The Trust seeks to generate a return of RBA cash rate plus 3.50% annually. The RBA cash rate currently sits at 3.85% per annum. GCI’s actual distribution yield for the 12 months to 30 June stood at 8.50%, while the current yield based on the June distribution annualised is 7.98%.
Growth in Assets and Capital Offers
In FY25, Gryphon raised A$377.5 million through two capital offers. Both raises were completed early due to strong investor demand. GCI’s market capitalisation grew to A$1.05 billion. The increased scale has brought key advantages. These include enhanced diversification, greater ASX liquidity, and reduced operating costs per unit. ASX trading liquidity has increased sixfold since 2019.
Strategic Asset Allocation and Portfolio Size
Grtphon currently holds 150 bond positions and 83,213 underlying residential mortgage loans. Its fixed-income investments are floating rate in nature. The fund’s credit spread duration is 1.03 years, and interest rate duration remains low at 0.04 years. This structure positions GCI to navigate interest rate changes. The weighted average interest rate across the residential portfolio stands at 6.99%.
Detailed Loan and Mortgage Characteristics
The average balance of residential mortgage loans in GCI’s portfolio is $435,441. Prime loans make up the majority, with a smaller allocation to non-conforming loans. The average loan-to-value ratio (LVR) is 65%. Just 8.44% of loans exceed $1.5 million. Arrears of more than 90 days represent 1.46% of the total. The residential mortgage loan pool includes 58% owner-occupied properties and 25% interest-only loans.
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ABS Allocation and Portfolio Construction
Gryphon has increased allocation to Asset-Backed Securities (ABS) during FY25. ABS now represents 35.1% of the portfolio, including SME, auto, and consumer segments. This strategy allows greater flexibility and diversification. Loan-level data and stress-testing form the basis of Gryphon’s asset selection. The ABS portfolio includes 4,453 underlying SME mortgage loans with an average balance of $438,806. These loans carry an average LVR of 60.6% and show only 0.43% arrears beyond 90 days.
Listed Investment Trust Offers Structural Benefits
GCI’s listed investment trust structure helps it avoid redemption pressure. This enables long-term investment strategies. The closed-end format reduces forced asset sales and allows alignment with institutional investors. Gryphon’s capital management strategy remains disciplined. New offers are limited to ensure alignment with available investment opportunities.
Consistent Return Across Timeframes
The NTA net return for June was 0.65%. Returns for 3, 6, and 12 months were 1.77%, 4.02%, and 8.73% respectively. Over three years, the annualised return reached 8.58%, while five-year and inception-to-date returns were 7.16% and 6.36%. GCI has consistently outperformed its target return across all reported periods.
Investor Confidence Reflected in Demand
Strong investor demand during FY25 confirms market confidence in Gryphon’s management. Both capital offers were scaled back. The increase in fund size has enhanced portfolio construction. Gryphon now has access to a broader investment universe, including secondary market opportunities and private transactions.
Outlook for H2 2025
Considering the recent situation on the market, Gryphon has again focused on the flexibility and portfolio liquidity. The team will move on with knowledge-based practices to cope with the emerging risks. Some fundamentals such as, regular monthly income, risk-reward returns, and preservation of capital remain unchanged. True to this, the management of GCI expects to continue with its resolute investment strategy.
Conclusion
The Gryphon Capital Income Trust has delivered a strong performance in FY25. With a total distribution return of 8.50% and consistent outperformance of its target, GCI has solidified its reputation in the Australian securitisation market. Through effective risk management, disciplined capital raising, and strategic diversification, GCI remains a key choice for income-seeking investors.
