Ex div today explains slight drop. Otherwise, trend upwards. Decent yield (just short of 5%) at current prices and trading at around NAV level (so no premium being paid to buy in). The aim of the floating rate fund is, unlike conventional bonds, to provide some protection from rising inflation and interest rate rises. There was a write up of this fund in a Sunday Times article (2/12/12, 'Last Chance to Switch from Bonds') on the supposed bond bubble and means (including this one) of avoiding it while still having the benefits of a less volatile asset class which is not correlated to equities.
12 Oct '12
The portfolio has not had any defaults since inception. "It will come as no surprise that our investment focus over the final quarter will remain in the US primary market. The current pipeline of deals is very healthy at just over $35bn. Most importantly, we believe US companies remain fundamentally strong and continue to report decent earnings. The fact that the European new issue market is effectively closed for the remainder of the year compounds our view," NB Global said. "Whilst secondary opportunities remain, these are more limited at present given the market rally we have seen, but we continue to monitor the situation and will still continue reducing the more volatile segments of our portfolio and taking profits on some lower yielding assets that we bought at a discount. Although our focus is on the primary market we are well aware that market conditions can change quickly, and cognisant of the fact that if we do see a period of volatility in the run up to year end, that this is likely to present significant secondary buying opportunities," the statement concluded. The fund currently produces an annualised net yield per share in the region of 5% on the issue price, plus some capital appreciation.
12 Oct '12
Corporate loan investment company NB Global Floating Rate Income Fund said its investment focus for the rest of the year will be on the US primary market, as the European new issue market is effectively closed for the remainder of the year. The group revealed that at the end of September, just 2.39% of its investment portfolio was denominated in euros, while 2.66% was denominated in sterling; the rest was all in dollars. NB Global is invested primarily in investments rated B and Ba by debt rating agencies, with B rated investments accounting for the lion's share at the portfolio at 54.55%; Ba investments comprise 39.20% of the portfolio. Company rules allow for up to 20% of the portfolio to be invested in bonds, but the firm reduced its bond position to 6.7% at the end of September from 11.6% at the end of June, due to narrowing spreads between loans and bonds. The group has also reduced its non-US exposure, with European assets down from 7.4% at the beginning of the third quarter to 5.1% at the end, largely because the firm has cashed in on some investments and has not replaced them with new issues, most of which have had the portfolio manager reaching for the barge-pole. "Our view on default rates for 2012 is sustained, with the US below 2.0% and Europe at 7.0%, with current trailing 12 month default rates of 1.00% and 6.2% respectively," the firm revealed.
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