MA Financial Group Limited

ASX:MAF

MA Financial Group Limited

ASX:MAF
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$4.56 (-0.2%)
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#98
Rank
7
Held by
13
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Reports (2) My Report Forum Investors
Forum Topics MAF MAF Business Model/Strategy

Pinned straw:
Mujo
Added 10 months ago

One of MAFs key private debt funds has a unique structure where there are two classes of units. Class B represents 10% of the Fund and is fully loss absorbing before Class A where investors enter are impacted.

Exerpt from Bondadviser research report:

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Pretty material risk to the equity holders if things did go bad.

NewbieHK
10 months ago

Hi @Mujo I think the point to emphasise (note I am a holder) is that by using the A and B share structure in this way the company is likely to be more prudent in their actions (credit considerations), due to the significant consequences, of poor decisions.

I am extremely bullish on MAF and have been impressed with their continued inflows into Funds. They are setting themselves up for significant increase in profits down the line as the different investment areas evolve.

note: I hold (there is, might be, could be, most likely will be some personal bias involved in my response)

9
Mujo
10 months ago

100%, that is the idea and attraction of the MA Priority Income Fund and a good sales point for investors against the 100 other private debt funds around now. There is the risk to MAF though especially if we enter a nasty recession at some point (hopefully not) and the loss absorption comes into play. From what I remember the backtesting showed the buffer theoretically get down to 3% during the GFC whcih would equate to a 70% wipe out for Class B units - the BDM may have been incorrect though as didn't see the actual number. They would recover i imagine as they essentially keep the excess return above the RBA + 4% in normal times.

I don't own but a lot of smart people like MAF so just thought I'd highlight the risk.

5
edgescape
10 months ago

I have a holding in the MA Secure Loan fund (Class A) and have also held through the Covid pandemic.

I am well aware of the risks involved and have done my research. So I find this discussion interesting.

Don't know much about Class B. However one point I will make is that there have been no missed payments from the fund. Everything moving like clockwork The PDS is quite comprehensive with processes they go through before lending out money and who their clients are.

So initial impressions appear to be good for now (touch wood). But since I'm Class A I rank above B so the situation is different.

You can do worse with La Trobe Financial and their constant ads on TV for their income product. Big warning sign right there - can also confirm going through the product review website. There are also a few others out there but I have not looked closely at those.

That's my 2 cents as a Class A customer. Be good to hear from a Class B customer.

7
Mujo
10 months ago

@edgescape not sure if the MA Secure Loan Fund that you mentioned has the same structure as the MA Priority Income Fund that I am referring too. However, Class A is definitely better placed. Just to be clear Class B is held by MAF i.e. the head company only i.e. shareholders, so as you said the risk lies with them. I was just trying to point out this risk to MAF (the ordinary equity) shareholders.

I think the unique structure is definitely attractive for holders of Class A and why the MA Priority Income Fund is getting so much in inflows. The more inflows into the MA Priority Income Fund i.e. Class A the bigger the potential risk for MAF shareholders who essentially own part of Class B.

If this same structure applies to other Funds (I haven't looked) the risk to MAF ordinary equity seems even higher.

9