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To generate attractive, risk-adjusted returns, principally through income distributions, mainly invests in US and European CLOs or other vehicles.
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I may have this wrong then? I've contacted my broker about all of this.
I wondered this too. I've put a little bit in here to test the water earlier this week.
In the RNS it says "Incorporated in Guernsey under The Companies (Guernsey) Law, 2008, as amended, with registered number 58123 and registered as a Registered Closed-ended Collective Investment Scheme with the Guernsey Financial Services Commission" - being Guernsey there may well be no Witholding Tax at all, but I am waiting to see if I understand it correctly.
At the end of their dividend declarations, they state "Dividends will be paid gross of tax.". Here's to hoping!
Think l sussed it out.
0% in a SIPP
15% in any other type of account. i.e. ISA and normal trade accounts are treated the same due to double tax agreement
I need to go and read about Foreign Tax Credit Relief (once the ISA is maxed out and onto using my main trade account). US shares are complicated things.
Just completed my W-8BEN form
Thanks
can't speak for an ISA but zero in a SIPP
Evening All,
Am very new to this share, I have a question. Do the dividends yet charged the 15% or 30% US Withholding Tax or is it tax free? l have a few of these in an ISA, am planning to get more.
Many thanks
Archie . You did not address. your. query to me but in case. you are interested I also hold BGLP which is in CLOs and yields about 11% . I have held it for 5 years and always pays. except for one payment. at the beginning of. Covid. I also hold TFIF which is about. 20% in CLOs and yields about. 7 1/2%. Other high yielders. you ma y like are. HFEL PHNX RGL MNG.
Thank you for your response damofarl
I'm investing primarily in my SIPP so happy to be thinking long term with the investment here. Currently have just under 5% in and TORO and FAIR combined but am looking to build up larger stakes in high yielders generally so not afraid of investing a bit more. Also hold NESF too. Is there anything else you recommend looking at?
Of course exchange rates are a factor too and I'm already seeing shifts in the £ value of the investments as the GBP to USD/EUR rate moves. Do you pay much attention to the exchange rate when timing purchases?
Kentio; quick answer no, but will respond more to that on TORO board in due course. SP loss on MPLF highlights a big downside in this sphere, if you have to sell (if held less than 2 years you will always incur a loss).
As an aside, fan of NESF myself.
Hi Damalfi. Manythanks. your. opinion. I have this morning sold out of MPLF - there·s just too much uncertainty. Sold at a substantial loss of. course. Looking at reinvestment, whilst I intend . to put more into NESF. for long term income I also. compared TORO. with BGLP. What worried me about TORO was the. share. graph over 5 years, a fall of. about. 35%? (although this was mainly at the beginning of. Covid) With BGLP. a fall of. about. 8%
. . . Does. that. concern . you? Kind regards
kentio; no, nothing specific/RNS'd, just my view. Reading the announcement, it's being merged into Investcorp. if it wasmajority share owned on an arms length basis, the yields could continue but not from within Investcorp. The marble founders moving to take up a new role as Head of Investcorps CLO's etc led me to that conclusion.
Hi Damalfi,
I had read. the announcement re the. merger with Investcorp - . You say this will mean the loss of a. consistent high yielder but I have not. read any indication that. dividends will no longer be paid. Can you give me any info on that? Thanks
Hi Kentio; I also hold BGLP, and whilst the yield there is lower than here/others, it was my first CLO type stock and is now a free ride for me.
Marble is being taken out in 1Q23 by Invesco, not a situation i'm happy with, as the 'merger' nature of it means the loss of a consistent high yielder AND no takeout premium - i mention as it these types of stocks often have very concentrated (controlling) shareholdings, and as such that concentration can be a risk, as they could take private without premium/fair value, and you are at their behest. The flip of that, i find, is, these holdings are often family trusts for high net worth individuals who don't sell on gyrations as they are in for long term tax efficient dividends. Take your own view on this, but i do notice a commonality of such across these stocks. Because of these high net worth investors/trusts i don't see any takeouts where NAV discount could be captured back by small investors.
TORO - i have more here than there, but i like TORO very much; i like the dividend yield link to NAV and that unlike most that are very concentrated in the US, there is a wider geographical spread of origination. I also find the monthly updates, and refreshingly honest and informative.
The penultimate. word. should be "like" not "lie"!
WE corresponded. previously Damofari. I admire. your. bravery in holding 23% in CLOs. I am at 10% and I thought. I was a bit over. the. top! Your last para.s very relevant. The. stock is. almost. totally ignored. by investors who either. do not understand how they. work or. are too lazy to. find out. I did note. that Henderson High Income. has a small holding in BGLP, which I. hold with FAIR nd MPLF. Is there any reason. why. you. particularly lie. TORO?
Hi Archy;
i have about 23% in these types of stocks and just under 7% here, levels/a concentration, i wouldn't recommend to anyone, but which i'm perfectly comfortable with.
Generally speaking i don't hold more than 20% in any area (say oils or housebuilders or banks), or more than 5% in any single stock, but here I am. I'm partly overweight because of conviction but also because other more mainstream high yielders i hold have struggled (housebuilders/mineral companies sanctioned etc come to mind).
Adding has to be your call, but beyond the risk of concentration, the specialised nature of this sphere, you have to be prepared to hold, and hold (think 5 years), as liquidity and spread will punish you if you need to sell sharply. Also expect zero SP growth.
Nice one damofarl , thank you for your detailed response.
Hadn't clocked the dividend had fallen, but still, it ain't half bad at 16.4%!
I'm in here now, alongside TORO. The spread (especially on TORO) is an irritant (Not nice seeing your holding valued at a few % down the instant you buy) but your mindset of seeing that as a price worth paying for the recurring dividends makes sense.
I'm now thinking of adding more. May I ask what % of your pf you have invested in this arena?
cheers
hi archy; yes i'm here too, overweight in this sphere of investment and particularly in FAIR but comfortably so. To answer your points...
20% yield - well it's16.4% on todays SP - the Company recently advised of a new FIXED dividend policy, namely 2c a quarter. If you go back thru the comments, you will see, i /others, weren't sure of the value of such 'fixed' nature, which was announced alongside a share buyback programme to reduce NAV discount. That said, it gives a minimum floor, (yield) and certainty, reinforced by this accompanying statement...
"...Establishing a consistent level of dividend provides greater certainty about future income for existing and prospective shareholders; based on the last quarter's portfolio cashflows the 2 US cents quarterly dividend would have been healthily covered.............The Board and Investment Adviser believe that recent movements in the market price of the 2021 Shares are not being driven by fundamentals and intend through these measures to demonstrate the Company's capital discipline and confidence in the Company's cashflows and NAV." - The key there is 2c is healthily covered.....
Moneyweek quote; fair comment that, yes technically it's high risk; the nature of how they make their money is technical to the lay person (which includes me!). In a nutshell, they borrow at 5% and lend at 6% taking the margin as profit we see in dividends; so yes, impacted by interest rate changes, which suggests a volatility, but actually they are a margin business so if well run (i believe they are) they are constantly rotating into whatever the current rates (that they borrow at and then lend at) whilst still earning a margin. The 'risk' any investor in this field needs to know about CLOs is, they are akin in some ways to the spreading/packaging of multiple mortgages, supposedly to spread risk, which actually concentrated risk and caused the last financial/banking crash, except this investment is in corporate loans and not personal mortgages. I find, because of the spread, generally your SP is down day one, but a years yield covers that, then, as i've found, a 10%+ annual yield - you just need to take that initial hit as part and parcel.
Share price halving - aside from me getting it as about a 38% drop in your 10 year timeframe, one has to accept that this type of stock is predominated on paying an income/yield not on growth. the Co is constantly paying out the value they generate, so without growth in their (provision of) loans, reducing their market cap/SP is sort of inevitable. What have the dividends received been in that 10 year period? in their consistency, far in excess of that SP loss The flip side of that, is that if they were to stop lending, manage out their existing loans to close, there would likely be an SP appreciation, but the annual yield lost forever.
Buy sign; yes, but the supposedly complex/high risk nature here deters people and make this (and it's ilk) a bit of a hidden secret. J
Hi damofarl, I've found my way here after investing in TORO (thank you for your welcome message there!).
I thought the divvy on TORO was market-leading, but am pleasantly surprised to be very wrong about that. The dividend yield here appears to be 20% - wow!
Having looked into what these companies are all about, I found this quote on Money Week:
"It is vital to note that investing in CLO funds is high risk. Still, if the funds keep providing returns in the 10%-20% range (most of that in dividends) as they have done, then a bad year (or two) might be worth it to get access to the extra returns from all that financial engineering."
I must admit to not really understanding what CLOs are all about, or why they are considered high risk (far too technical for me)? But from what i can see, the dividend here has been a good 10c a share going back to 2014 (bar covid year). That gives confidence that the dividend is sustainable.....but what about the share price? That has halved over the same period. Any ideas of the reason for that?
Finally, I found this statement on the September :
"We continue to believe that the 18.0% dividend yield offered by the Company, supported by a high-quality portfolio of primarily first-lien, senior secured loans with very attractive term, non-mark-to-market financing represents one of the most attractive risk adjusted opportunities available to investors in the current market environment."
https://www.rns-pdf.londonstockexchange.com/rns/8355Y_1-2022-9-8.pdf
That statement is about as big a "buy" signal as I could hope to see on a company announcement. Would you agree, or have I missed anything?
agreed;
a progressive dividend policy whereby a fixed quarterly divvy, with any excess cash on books above a set floor, returned as specials would have removed the NAV discount. That mix of certainty and upside would have engendered more interest /loyalty.
if, IF one takes the view that these buybacks are at a discount, and working, there must come a point where the actual cash at hand will grow. What then? a special divvy? so why not just do straight away?
Hi damofarl
"rebates 50% of fees when SP is under NAV"
Surely the quickest way to do this would be to raise the dividend back up, not a buyback.
Gavsternbc; i don't think the buyback is great, but without an update its hard to illicit if it is beneficially masking dropping performance. I don't think it's a means for a large seller - i mean the realisation shares gave that option.
Reading across from NBMI's update today, they highlight a positive September/October, with no defaults/lowest default rate for years, and underlying companies with strong and strengthening free cashflows. I hope FAIR fares as well albeit NBMIs performance is related to short duration loans whereas ours are longer fixed durations, and we might be getting squeezed on the higher day to day lending cost against a (now) lower long term loan rate. If that is the case, the flip to that is that it should make the underlying borrowers more sustainable having a competitive loan cost advantage.
As the investment manager rebates 50% of fees when SP is under NAV, i would have thought the focus would be to eradicate such so do feel these buybacks are aligned with all parties interests - until the next update i do just worry that the discount will only reduce because of reduced NAV (performance).
Is this buyback really that great or as you say damofari, the main reason is to mop up sales, or even provide a means for a larger holder to sell out (which is obviously wrong to suggest but we'd be naive not to underestimate the power of a wink and a nod). Only if sellers are prepared not to sell less than $0.48 will it provide a floor, and likewise I'm fine if that continues for the mid term through relative turmoil elsewhere.
The $20 million pledged is being spent at a rate of around $25000 per day will currently take 2 to 3 years. Once spent there will be around 11 percent less shares.
The imminent dividend announcement will be no surprise, at a fixed 2c "healthily" covered by income, but be interesting to see the next progress/NAV RNS to see if the recent rate volatility is being managed, the cover is still healthy, and if the buyback is positively impacting.
It doesn't seem to be uplifting SP, but it does seem to be putting a floor on it - if all the rest is 'business as usual', buying back 10% has got to lift the divvy cover, and whilst actually liking the surety of stating a fixed quarterly 2c, has to at some point crystalise into a special divvy. Be interested in others views...
agricore; it's a sparse board here, but thankfully ramping/deramping fluff free so welcome and thanks your contribution! You timing was fortuitous. I have found stocks in this arena have a very wide spread, but i have always took the view, based on the consistent and high dividend, that the first year's divvy would cover the spread SP loss, and then 10%+ ongoing - and so it has transpired . You managed to avoid that SP spread loss, so bravo!
Gavster-NBC; likewise, great to see you aboard. Ive been here around 4 years, precisely for the yield, and have never been disappointed. Paid consistently high throughout with only a hiatus during covid which was was done by proactive mgmt rather than concern of fundamentals/income.
Uniquely to the stocks i hold in this sphere, FAIR was actually once at a very small premium to NAV ( i always look for a large discount to protect the yield), and the recent comment exemplifies not only their mgmt of the loans/loan cycle, but their total belief in the medium to long term despite the current market/recession/interest rate gyrations and concerns. The sort of comment i'd expect from a 'ramper', or dot.com type opportunist float or SPAC. But the detail they provide, the honest fluff free updates shows it's supported by fundamentals/their proactive mgmt.
Yes i'm a big fan of FAIR; as for ..."when it comes to buybacks. They simply serve sellers, rather than holders.", whilst i generally agree with you, if like i, you believe in FAIR, sellers are selling into a NAV loss, and i'm incremently gaining when they do. In this instance, i'm willing to go with them, as i don't see the main concern that i have with buybacks - namely the 'false' inflation of earnings/triggering of share options for mgmt, and the masking of poor underlying ongoing performance.
Their recent extending of loans on either lower borrowing interest or high/higher yields, or both, in these turbulent market/economic times just shows their proactiveness/awareness/talent. And irrespective of buybacks, having fixed the quarterly dividend, i don't discount if the current income from loans trajectory continues a one off special dividend,
I found it quite perverse that a stock such as this, supposedly high risk, for professional investors only is one i never worry about and rarely look at - yet my supposedly safe/boring FTSE 100 stocks can 'lose' 10% in a week! An example being MNG which i hold that has dropped 18% in a month.. If as you have, you read the detail, take the time to understand how they operate, you realise how this is less high risk, and more predictable infrastructure style, albeit higher yielding.
Ignore SP gyrations, celebrate the unrelenting yields.
Hi Damofari. Good to see you here.
Just bought my first holding. Chasing the high yield, and took advantage of the bounced up pound after the Truss-anomics dip and BofE intervention.
My attitude is the same when it comes to buybacks. They simply serve sellers, rather than holders.
Cheers and GL