Company Announcements

 

M&G CREDIT INCOME INVESTMENT TRUST PLC

 

(the “Company”)

 

LEI: 549300E9W63X1E5A3N24

 

Quarterly Review

 

The Company announces that its quarterly review as at 31 March 2026 is now available, a summary of which is provided below. The full quarterly review is available on the Company’s website at:

 

https://www.mandg.com/dam/investments/common/gb/en/documents/funds-literature/credit-income-investment-trust/mandg_credit-income-investment-trust_factsheet_gb_eng.pdf

 

 

Market Review

 

The conflict in the Middle East, and the accompanying spike in energy prices, was the defining event of the first quarter of 2026 and significantly altered the macroeconomic landscape. Prior to the onset of the conflict on 28 February, global economic activity had been resilient and the disinflationary trend remained on track. However, as the conflict continued through March, disruption to global oil and gas supplies, caused by the closure of the Strait of Hormuz, raised the prospect of higher inflation alongside a potential slowdown in economic growth, a so called stagflationary regime or ‘worst of both worlds’ scenario.

 

Government bond markets adjusted sharply over the quarter as rising oil prices fed through into higher inflation expectations and reduced the likelihood of near term policy easing. These concerns were reinforced by inflation data from the eurozone, where annual inflation rose to 2.5% in March from 1.9% in February, driven primarily by higher energy costs. Against this uncertain backdrop, major developed market central banks kept interest rates on hold. However, this pause was accompanied by firm messaging that further policy tightening remained on the table should inflationary pressures persist. As a result, investors began to anticipate interest rate hikes later this year rather than rate cuts, and government bond markets sold off in March, erasing strong year‑to‑date gains up to that point. UK gilts were among the weakest performers, with the 10 year yield reaching a post 2008 high of 5% at one point during the quarter. Similarly, UK credit underperformed both European and US debt markets.

 

Manager Commentary

 

During the opening quarter of 2026, the Company delivered a NAV total return of +0.41%, compared to the +1.88% returned by the benchmark. Performance lagged primarily due to our intentionally defensive positioning, which resulted in portfolio yield running below the target return, alongside credit spread widening following the escalation of the Iran conflict.

 

Concerns about private credit, predominantly focused on the US sub investment grade loan market, also contributed meaningfully to increased market volatility during the period. Sectors with a high proportion of intangible assets sold off over the quarter, driven by fears surrounding Artificial Intelligence (“AI”) as a disruptive technology, particularly within software. Fixed-income markets are increasingly pricing in an AI-driven risk premium. Lenders are demanding higher yields from issuers most vulnerable to technological obsolescence, particularly where AI is shifting established competitive moats. Against this backdrop, it is important to highlight that the majority of the portfolio is invested in investment grade quality assets and remains predominantly focused on Europe and the UK, with only a small exposure to the US. The private portion of the portfolio has no direct software exposure, while software related holdings across the remainder of the portfolio represent less than 2% of total portfolio value, including indirect exposure via the M&G European Loan Fund.

 

Demand for share issuance began the year strongly, and the Company issued an additional 5.8 million ordinary shares up to the end of February. We invested these proceeds, alongside surplus cash, across both public (£6.8 million) and private (£5.7 million) markets. The range of new and existing private opportunities invested in during the quarter included: a fully operational data centre with long dated leases to blue chip clients (£1.1 million); an existing, well performing RegCap transaction (£1.75 million); a senior term loan secured against prime urban logistics hubs in the Benelux region (£1.75 million); and a senior term loan to a UK headquartered paper packaging and labels business (£0.75 million).

 

Public market purchases focused on leveraging our in house research capabilities to identify relative value opportunities where we believe risk is mispriced, either at new issue or in the secondary market. This doesn’t represent a change to our long held view that public credit spreads are, in aggregate, expensive (i.e., tight) and offer a low premium for taking on risk, leaving markets vulnerable to sharp corrections from economic or geopolitical shocks. In the near term, investment grade public market opportunities offering returns close to SONIA +4% (the Company’s target return) without assuming significant default risk remain scarce. As we have previously emphasised, this is not the stage of the cycle to be chasing returns, as tight credit spreads actually mask deep macroeconomic and geopolitical risks. Amid these conditions, we continue to prioritise attractive relative‑value opportunities where we identify potential for further spread compression alongside adequate risk‑adjusted carry, within businesses demonstrating robust - albeit potentially unspectacular - operating performance. We remain patient as we await more compelling entry points to add risk more meaningfully.

 

In March, amid heightened macroeconomic volatility, the ordinary share price moved to trade at a discount to NAV. As a result, the Company recommenced its buyback programme in accordance with its Zero Discount Policy, which seeks to ensure that ordinary shares trade close to NAV in normal market conditions. This resulted in the repurchase of 250,000 shares into Treasury. During the quarter, we also sold £4 million of the portfolio’s exposure to the M&G Secured Asset Backed Credit Fund ahead of funding several private opportunities in early Q2.

 

Outlook

 

The conflict involving Iran represents the most significant risk to global supply chains since the Covid 19 pandemic, introducing a new and potentially long lasting shock to the global economy and driving elevated volatility across financial markets. History suggests that geopolitical shocks very rarely leave a lasting dent on asset prices and are generally followed by rapid market recoveries, which perhaps explains the market’s rather sanguine outlook. Indeed, at time of writing, the announcement of a two week ceasefire has seen a very strong rally in rates and equity markets.

 

However, despite the ceasefire, shipping traffic through the Strait of Hormuz remains constrained. Should the nascent ceasefire hold, the reality is that it is likely to take months rather than weeks to negotiate a durable and stable peace framework. The global economy’s heavy dependence on the Strait of Hormuz arguably represents Iran’s most significant bargaining chip, increasing the probability that shipping disruption will persist for some time. This suggests continued volatility in energy markets, inflation expectations, and government bond yields, complicating policymaking for central banks - particularly in Europe, where economic growth remains anaemic and there is less latitude for policy missteps.

 

It is also worth noting that governments have rarely operated with such elevated deficit and debt levels. Alongside central banks, policymakers have limited fiscal and monetary ammunition available to contain a prolonged economic downturn should one materialise. This creates a high stakes environment that hinges on a swift and credible resolution to the conflict. To date, equity and credit markets appear to have priced in only a brief disruption, leaving them particularly exposed to a more protracted scenario that could result in a pronounced stagflationary shock. The potential for a global energy emergency-and its associated second and third order effects, including policy pivots, demand destruction, forced efficiency, and capital reallocation, cannot be ignored. Indeed, European Central Bank President Christine Lagarde has already warned that markets may be underestimating the economic fallout from the ongoing Middle East conflict.

 

Paradoxically, despite the heightened macroeconomic uncertainty and increased geopolitical risk, credit spreads remain anchored and continue to appear expensive when viewed through a historical lens. As a result, investors are not being adequately compensated for the breadth of short and medium term risks, nor for the plausible scenario of a sustained energy supply disruption.

 

Given the current market backdrop, we believe it is appropriate to reiterate our investment philosophy. We allocate capital based on our assessment of relative value, which is underpinned by rigorous fundamental credit research and in depth analysis from a team of over 100 analysts. When credit appears expensive, as is currently the case, we position the portfolio to be a net beneficiary of potential credit spread widening or market volatility by adopting a cautious stance and enhancing overall credit quality. We then remain patient and disciplined, awaiting more attractive entry points to take on additional credit risk, which typically arise during periods of macro driven volatility when dislocations emerge between fundamentals and valuations. This approach has historically supported portfolio performance.

 

At present, we maintain a significant allocation to AAA/AA‑rated ABS funds that are ready to be reallocated as opportunities arise, alongside access to a £40 million credit facility. In our opinion, this leaves the Company well positioned to respond should heightened volatility create opportunities to add risk and enhance portfolio yield.

 

MUFG Corporate Governance Limited

Company Secretary

 

21 April 2026

 

 

 

- ENDS -

 

 

The content of the Company’s web-pages and the content of any website or pages which may be accessed through hyperlinks on the Company’s web-pages, other than the content of the Update referred to above, is neither incorporated into nor forms part of the above announcement.

 

For further information in relation to the Company please visit: https://www.mandg.com/investments/private-investor/en-gb/investing-with-mandg/investment-options/mandg-credit-income-investment-trust