12 Jun 2018 09:18
Alcentra European Floating Rate Income Fund Limited
Market Commentary
Financial markets were volatile in May as the Italian political crisis sent prices lower after what had been an encouraging first two weeks of the month1. As is often the case, European loans remained relatively robust and although loans were marked lower in the second half of the month, May as whole still generated a positive performance. The Credit Suisse Western European Leveraged Loan Index finished at +0.11%2.
It was a different story in High Yield bonds, where some new issues were pulled after the Italian headlines created some more meaningful market weakness3. European High Yield finished the month down -1.25%4.
Despite this backdrop, May was another strong month for new loan issuance, with €9bn of new launches, including €2bn1 of loans as part of the debt package for the take private of TDC, the Danish Telcoms business, by Macquarie5. This trend may well continue as S&P reported at the beginning of June that there was a strong forward calendar of a further €15bn of new launches to come.
Another positive market development is that the default rate continues to decline. The latest reading fell to just 0.4% at the end of May, down from 1.1% at the beginning of the year and 2.6% 12 months ago6.
Portfolio Manager's Commentary
The best performing name within the portfolio was a retailer, a sector that has remained volatile over recent months. This position was up +4.46% after improved sentiment after a stronger earnings announcement. The weakest performers were down 1% to 3% and were mainly fixed rate bond and floating rate note holdings, which were typically more affected by weaker market technicals as a result of the Italian situation.
ENDS.
1 S&P Global Market Intelligence, LCD European Playbook 1 June 2018
2 Credit Suisse Western European Leveraged Loan Index GBP hedged, 31 May 2018
3 S&P Global Market Intelligence, LCD News Today: June 1, 2018
4 ICE Bank of America Merrill Lynch Currency High Yield Index, 31 May 2018
5 S&P Global Market Intelligence, Correction: TDC Ratings confirmed following bank meeting, LCD News, 25 May 2018
6 S&P European Leveraged Loan Index Default Rates, 31 May 2018
For further information please contact:
Alcentra Limited
Simon Perry +44 20 7367 5272
Factsheet
An accompanying factsheet which includes the information above as well as wider commentary on the investments made by the Fund can be found on the Fund's website www.aefrif.com.
Background Information
Alcentra European Floating Rate Income Fund Limited, a Guernsey Authorised Closed-Ended Collective Investment Scheme, regulated by the Guernsey Financial Services Commission and listed on the Main Market of the London Stock Exchange invests predominantly in senior secured loans and senior secured bonds issued by European corporates and targets returns (net of fees and expenses) of 7% to 10% per annum. The Fund targets a dividend yield of 5.5 pence per £1.00 issue price of the initial offering of shares in the Fund for the first full year of investment, paid quarterly.
Important Notices
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
This report is aimed at existing investors in the fund and has not been approved by any competent regulatory authority.
The information contained in this document is given as at the date of its publication (unless otherwise marked) and is based on past performance. Past performance is not a guide to future performance and the value of investments and investment value can go down as well as up. The future performance of the Fund will depend on numerous factors which are subject to uncertainty. Including changes in market conditions and interest rates and exchange rates and in response to other economic, political or financial developments, investment return and principal value of your investment will fluctuate, so that when your investment is sold, the amount you receive could be less than what you originally invested. Past or current yields are not indicative of future yields.
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This document includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements include, without limitation, statements typically containing words such as "believes", "considers", "intends", "expects", "anticipates", "targets", "estimates", "will", "may", or "should" and words of similar import. The forward-looking statements are based on the beliefs, assumptions and expectations of future performance and market development of Alcentra Limited ("Alcentra"), taking into account information currently available and made as at the date of this document. These can change as a result of many possible events or factors, not all of which are known or within Alcentra's control. If a change occurs, the Fund's business, financial condition, liquidity and results of operations may vary materially from those expressed in the forward-looking statements. By their nature, forward-looking statements involve known and unknown risks and uncertainties. Forward-looking statements are not guarantees of future performance. Alcentra qualifies any and all of the forward-looking statements by these cautionary factors. Please keep this cautionary note in mind while reading this document.
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