C Share Update

RNS Number : 1618J

NB Global Floating Rate Income Fund

12 July 2013

 

NB Global Floating Rate Income Fund

Limited C Share Update

The Neuberger Berman Global Floating Rate Income Fund Limited targets income generation whilst seeking to preserve investors' capital and give protection against rising interest rates.

The Fund's managers seek to generate this yield by investing in a global portfolio of below investment grade senior secured corporate loans with selective use of senior secured bonds, diversified by both borrower and industry. The Fund is managed by three experienced Portfolio Managers backed by what we believe to be one of the largest and most experienced credit teams in the industry.

The Portfolio, as at 30 June 2013 (excluding Cash):

·     was split 89.13% USD, 8.45% EUR, 2.42% GBP

·     had 7.89% allocated to bonds out of the maximum 20% allowable

·     was invested primarily in B (56.30%) and Ba (37.06%) rated investments¹

Market Environment ²

After a very strong start to the year, we began to see some volatility in May in the broader credit markets, primarily driven by the concerns that the Fed may taper/withdraw Quantitative Easing. While the loan market was more resilient than other fixed income sectors, many of which experienced 3-5% losses, we did see the year-to-date return on the US S&P/LSTA Leveraged Loan Index reduce from 3.23% as at 22nd May to 2.28% by the end of June. May did produce a positive return, but in June the Index suffered a 0.59% loss which was the first monthly fall since May 2012. A similar theme was seen in Europe where the S&P European Leveraged Loan Index year-to-date return fell from 3.27% to 2.78% over the same period, with a drop of 0.39% seen in June, the first negative return for 18 months. Despite the decline in both the US and Europe, loans have been the best performing fixed income asset class year to date. The loan market decline was caused by developments in the high yield market. Whilst historically high yield has been resilient to moves in Treasuries, we saw underlying nervousness from retail investors with the resulting outflows causing a 200bp widening in yields from 5% to 7%. These redemption notices triggered a selling of bank loans by high yield bond managers. Despite the volatility, flows into loans remained robust and came from the usual sources i.e. US CLOs and mutual funds brought in a combined $76bn as at the end of June. A handful of European CLOs have also printed this year; seven in total for €2.4bn.

The positive side of the volatility is that some of the more aggressive repricing/dividend recapitalisation transactions that were in the market were pulled and spreads on recent new issues have widened by 50-100bp from early May lows. The year-to-date issuance numbers remain strong and in the US we have seen some $267bn ($120bn in Q2) of institutional loans launched versus $120bn for the comparable period last year. Whilst the majority of these were repricing/refinancing transactions we did start to see some M&A related issuance which has helped grow the US market to just under $600bn, up almost $50bn on the 2012 year end and in line with its record level. We have also seen $36bn (YTD 2012 $39bn) of senior secured bonds and, in Europe, €23bn (€8bn) of institutional loans have been originated with €20bn (€7bn) of senior secured bonds.

Portfolio Management

The bias towards the US reflects our more positive views on the US economy where we expect modest economic growth and below trend default rates over the next 12-24 months. However, we have invested selectively in European transactions where the credit metrics mirror those of the US counterparts e.g. Douwe Egberts Master Blenders and Oxea and our exposure to Europe has increased to 10.8% from 9.1% during the investing period. We have seen attractive opportunities in single B names and are overweight at 56.3%.Additionally we have taken advantage of some  relative value opportunities in secured fixed rate bonds, particularly over the last six weeks of the period where we selectively added names such as Ista, Reynolds Group and HCA all at prices some five points below where they were trading in early May. Our fixed rate exposure ended the quarter at 7.9% of NAV. 

Outlook

We remain positive on issuer fundamentals and, as such, we remain comfortable with the current portfolio construction, particularly our continued overweight to single B names, and our allocations should remain reasonably constant for the next 6-12 months. We still think loans offer an attractive combination of current yield and short duration and therefore believe that demand for the asset class will continue. In the short term the loan market will likely take its lead from the HY market. Despite recent turbulence, our full year return forecast of 5-6% remains intact.

Source: BNP Paribas and Bloomberg. Data as at 30 June 2013. Past performance is not indicative of future returns.

1.   Source: Moody's Investors Service.

2.   Source: S&P LCD.

-ENDS-

For further information please contact:

Neuberger Berman Europe Limited          [phone]

Anji Stewart

FTI Consulting                                              [phone]

Neil Doyle                   

Ed Berry

Laura Ewart

Background Information

The Company is a registered closed-ended investment company incorporated in Guernsey. The Company is managed by Neuberger Berman Europe Limited, which has delegated certain of its responsibilities and functions to the sub-investment manager, Neuberger Berman Fixed Income LLC, both of which are indirect wholly owned subsidiaries of Neuberger Berman Group LLC. The Company's investment objective is to provide its shareholders with regular dividends, at levels that are sustainable, whilst growing the capital value of its investment portfolio over the long term. To pursue its investment objective, the Company will invest mainly in floating rate senior secured loans issued in U.S. Dollars, Sterling, and Euros by North American and European Union corporations, partnerships and other business issuers.

Established in 1939, Neuberger Berman is one of the world's leading private, independent employee-controlled asset management firms, managing approximately $216 billion in assets as of March 31, 2013. Neuberger Berman provides a broad range of global investment solutions to institutions and individuals through customized separately managed accounts, funds and alternative investment products. 

This document is intended only for the person to whom it has been delivered. No part of this document may be reproduced in any manner without the written permission of NB Global Floating Rate Income Fund Limited ("NBGFRIF"). The securities described in this document may not be eligible for sale in some states or countries and it may not be suitable for all types of investors. Securities in the fund may not be offered or sold directly or indirectly into the United States or to U.S. Persons. Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decision. The price of investments may fall as well as rise and investors may not get back the full amount invested. The target yield should not be taken as an indication of the Fund's expected future performance or results. The target yield is a target only and there is no guarantee that it can or will be achieved and it should not be seen as an indication of the Fund's actual or expected return. Statements contained herein, including without limitation, statements regarding the credit markets, are based on current expectations, estimates, projections, opinions and/or beliefs of the managers. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Such statements are necessarily speculative in nature, as they are based on certain assumptions. It can be expected that some or all of the assumptions underlying such statements will not reflect actual conditions. Accordingly, there can be no assurance that any projections, forecast or estimates will be realized. This document is not intended to be an investment advertisement or sales instrument; it constitutes neither an offer nor an attempt to solicit offers for the securities described herein. This document was prepared using the financial information available to NBGFRIF as at the date of this document. This information is believed to be accurate but has not been audited by a third party. This document describes past performance, which may not be indicative of future results. NBGFRIF does not accept any liability for actions taken on the basis of the information provided in this document. Neuberger Berman is a registered trademark.
© 2013 Neuberger Berman.

 

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