(Alliance News) - NB Global Floating Rate Income Fund Ltd on Thursday said it underperformed against its benchmark after holding additional cash for its share buyback programme while total loan market returns were strong.
Over 2019, NB Global Floating Rate's net asset value total return per share was 9.3% for sterling shares and 9.4% for dollar shares. However, excluding the benefit of buybacks in its year, returns were 6.6% and 8.1% respectively. Meanwhile its benchmark, the S&P-LSTA Leveraged Loan Index, recorded an 8.6% total return in dollar terms.
"The underperformance of the company (using the "excluding buybacks" returns) was the result of holding additional cash to conduct the share buyback program during a year where total returns for the loan market were strong," NB Global Floating Rate Chair Rupert Dorey explained.
The closed-ended investment company said its NAV per sterling share on December 31 was GBP0.9594, a 4.1% improvement from GBP0.9215 at the end of 2018. NAV per dollar share increased 4.3% to USD0.9872 from USD0.9468.
NB Global Floating Rate's total dividend for 2019 was 4.77 pence per sterling share and 4.91 cents per dollar share, both up 19% from 4.02p and 4.13 cents.
"The outlook for 2020 has shifted over the past several weeks due to the impact from mandated closures and social distancing efforts to "flatten the curve" of the Covid-19 pandemic. Yields in the loan market are likely pricing in severe scenarios for global GDP, but given the nature of the catalyst, it could prove to be transitory. Yield levels are pricing in default rate scenarios that are likely to be in excess of actuals, which has historically been the case," Dorey said.
"The investment manager believes yields are compensating investors for an above average but moderate rise in default rates from very low levels. As we continue to be vigilant to the developments of Covid-19, our primary goal remains one of avoiding default risk. While uncertainty around the duration and severity of the health crisis as well geopolitical event risk can result in heightened short-term volatility, the investment manager believes the company is well positioned."
Shares in NB Global Floating Rate were up 2.3% at 70.60 pence in London on Thursday.
By Anna Farley; annafarley@alliancenews.com
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