Portfolio Update - 31 March 2021

RNS Number : 8103V

NB Global Monthly Income Fund Ltd

19 April 2021

 

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS OR INTO OR IN THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN.

19^th April 2021

NB Global Monthly Income Fund*

Monthly Commentary & Portfolio Update

31st  March 2021

Key statistics

NAV (GBP)	GBP 0.9472
Current Portfolio Yield**	6.23%
Number of Investments	277
Number of Issuers	193

Asset allocation:

	Global High Yield:		29.01%
	Global Floating Rate Loans:		45.08%
Total Traditional Credit:			74.09%
	Private Debt:		14.93%
	CLO Mezzanine Debt:		7.79%
	Special Situations:		3.19%
Total Alternative Credit:			25.91%

Credit rating breakdown: as at 31^st  March (excluding cash), the portfolio was invested primarily in B (49.89%) and BBB/BB (14.72%) rated investments ¹

Market Update

Non-investment grade credit had a mixed month with lower quality outperforming the higher quality segments of the markets. Overall, the senior floating rate loan market was flat on the month with private debt and global high yield seeing better returns. CLO debt had a strong start to the year with a meaningful rally in January, but the balance of the quarter was roughly flat, as gains in February were offset by modest weakness in the CLO market in March, largely driven by the record primary market activity that accelerated mid-quarter.

The yield curve continued to steepen in March as the 10Y U.S. Treasury yield rose further in the month to a new 12-month high of 1.74%, which put pressure on longer duration, lower yielding fixed income. Improving issuer fundamentals, positive retail inflows in loans, record CLO originations along with better-than-expected macroeconomic data and rising inflation expectations fuelled investor interest in non-investment grade credit, which has much lower duration risk than other fixed income sectors.

Senior floating rate loans had a strong first quarter, up 1.78%, outperforming most other fixed income sectors. However, U.S. senior floating rate loans took a breather in March, as the S&P/LSTA Leveraged Loan Index (the "LLI"), returned 0.00% for the month with the lowest quality outperforming as BB, B and CCC returned -0.27%, -0.03% and 0.83%, respectively. The LL100, a measure of the largest, most liquid issuers, returned -0.31% which also underperformed the total LLI. The European Leveraged Loan Index (the "ELLI") returned 0.04% in March and 1.79% in the first quarter, excluding currency effects. The ICE BofA Global High Yield Constrained Index finished the month roughly flat, returning 0.05% in March and 0.70% for the first quarter. The Second Lien Loans index was up 1.45% in the month and 5.21% in the quarter. CLO debt saw some weakness in the month but good returns in the quarter as the CLO BB index gained 2.98% year to date and returned -0.50% in the month of March.

Defaults continued to decline in both U.S. and European non-investment grade credit markets, which is consistent with an economic expansion and improving issuer fundamentals. In our view, defaults in the near term are likely to continue to come from the more secularly challenged sectors and issuers. Non-investment grade credit, especially given its lower duration profile, will likely continue to see favourable investor demand and the pipeline of new issuance is also providing opportunity from a credit selection perspective.

In our view, yield levels in non-investment grade credit are more than compensating investors for the benign default outlook, will continue to provide durable income and are especially attractive compared to other fixed income alternatives. The economic recovery is now confirmed by recent data and is expected to be on an improving trajectory which continues to be supportive of issuer fundamentals. We believe the portfolio is well positioned for the start of this new credit cycle.

Portfolio Positioning

During March, the pipeline for Alternative Credit was healthy and so we identified a handful of new Private Debt investments for the Fund, increasing the allocation to 14.9% (up 3pts in the period). At a hedge-adjusted yield of over 7.5% we view these opportunities as accretive and attractively priced. We have selectively reduced exposure to floating rate loans. Floating rate loans remain the largest allocation for the Fund at 45.1% and the overall Fund exposure to floating rate assets remains close to 70%.

Our current allocation to BBB/BB rated credits ended the month at 14.7% while our exposure to CCC and below rated names finished the month at 29.7%. The increase in exposure to CCC rated names is in part a function of adding Private Debt investments which typically have low credit ratings. The exposure to floating rate assets and lower rated issuers has been accretive to portfolio performance so far this year. The new issue markets have remained active through March in both loans and bonds and are a source of opportunity for the portfolio. The fund participated in the jumbo USD secured bond issuance from AAdvantage (American Airlines loyalty program) in the period.

Recent Investments

Following an invitation to pre-marketing, NB Global Monthly Income Fund Limited participated in the financing for the acquisition of Precisely during March. Precisely is a provider of data integrity software and data enrichment products which was founded in 1968 and has executed well on its integration of Pitney Bowes' software and data business acquired in 2019 despite disruption from Covid-19. The loan notes we have participated in have a L+775bps coupon and benefit from a 75bps Libor floor and were issued at 99. Our constructive view of the credit is driven by the company's niche positions in the data management market, steady retention rates and high profitability with low capex requirements.

Early in March, the Fund invested in a private loan transaction to support the acquisition of S&S Activewear by CD&R. The company is one of three national distributors in the U.S. of imprintable apparel with over 80,000 customers and a long history of organic growth and market share gains. The industry has historically grown at mid- to high-single digits with half the growth driven by volume and half due to price/mix related to the increased penetration of performance apparel upon which S&S has capitalized. The Fund has exposure via loan notes with a L+875bps coupon and a 50bps Libor floor which were issued at a price of 96.5. We believe the company will benefit from increased corporate proportional spending and events as the economy improves and mobility increases later in 2021.

To access the March 2021 Factsheet, please click here  http://www.rns-pdf.londonstockexchange.com/rns/8103V_1-2021-4-18.pdf

The Fund's website can be found at the following address: www.nbgmif.com

1.  Source: Standard & Poor's

* Effective 9 September 2020, the fund has changed its investment policy and name to NB Global Monthly Income Fund Limited.  For more information, please refer to here.

** The Fund's Current Portfolio Yield is a market-value weighted average of the current yields of the holdings in the portfolio, calculated as the coupon (base rate plus spread) divided by current price. The calculation does not take into account any fees, fund expenses or sales charges paid, which would reduce the results. The Current Yield for the Fund will fluctuate from month to month. The Current Yield should be regarded as an estimate of the Fund's rate of investment income, and it may not equal the realized distribution rate for each share class. You should consult the Fund's prospectus for additional information about the Fund's dividends and distributions policy. Past performance is no guarantee of future results.  

-ENDS-

For further information, please contact:

Neuberger Berman Europe Limited (Manager) Elizabeth Papadopoulos	[phone]
Numis Securities Limited (Broker) Hugh Jonathan Matt Goss	[phone]
Praxis Fund Services Limited (Company Secretary) Matt Falla Gemma Woods	[phone]
KL Communications (PR) Charles Gorman Luke Dampier	[phone]

Background Information

The Company is a registered closed-ended investment company incorporated in Guernsey. It is managed by Neuberger Berman Europe Limited, which has delegated certain of its responsibilities and functions to the AIFM, Neuberger Berman Investment Advisers LLC, both of which are indirect wholly owned subsidiaries of Neuberger Berman Group LLC.

Neuberger Berman, founded in 1939, is a private, independent, employee-owned investment manager. The firm manages a range of strategies-including equity, fixed income, quantitative and multi-asset class, private equity, real estate and hedge funds-on behalf of institutions, advisors and individual investors globally. With offices in 25 countries, Neuberger Berman's diverse team has over 2,300 professionals.

For seven consecutive years, the company has been named first or second in Pensions & Investments Best Places to Work in Money Management survey (among those with 1,000 employees or more). In 2020, the PRI named Neuberger Berman a Leader, a designation awarded to fewer than 1% of investment firms for excellence in Environmental, Social and Governance (ESG) practices. The PRI also awarded Neuberger Berman an A+ in every eligible category for our approach to ESG integration across asset classes. The firm manages $429 billion in client assets as of March 31, 2021. For more information, please visit our website at www.nb.com .

RISK CONSIDERATIONS

Market Risk : The risk of a change in the value of a position as a result of underlying market factors, including among other things, the overall performance of companies and the market perception of the global economy.

Liquidity Risk:   The risk that the Fund may be unable to sell an investment readily at its fair market value. In extreme market conditions this can affect the Fund's ability to meet redemption requests upon demand.

Credit Risk:   The risk that bond issuers may fail to meet their interest repayments, or repay debt, resulting in temporary or permanent losses to the Fund.

Interest Rate Risk:   The risk of interest rate movements affecting the value of fixed-rate bonds.

Counterparty Risk: The risk that a counterparty will not fulfil its payment obligation for a trade, contract or other transaction, on the due date.

Counterparty Risk: The risk that a counterparty will not fulfil its payment obligation for a trade, contract or other transaction, on the due date.

Operational Risk:   The risk of direct or indirect loss resulting from inadequate or failed processes, people and systems including those relating to the safekeeping of assets or from external events.

Derivatives Risk:   The Fund is permitted to use certain types of financial derivative instruments ("FDI") (including certain complex instruments) which can give rise to particular risks, including market risk, liquidity risk and counterparty credit risk. This may increase the Fund's leverage significantly which may cause large variations in the value of your share.

Currency Risk:   Investors who subscribe in a currency other than the base currency of the Fund are exposed to currency risk. Fluctuations in exchange rates may affect the return on investment.

The past performance shown is based on the share class to which this factsheet relates. If the currency of this share class is different from your local currency, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency.

IMPORTANT INFORMATION

This document has been issued by NB Global Monthly Income Fund Limited (the "Company"), and should not be taken as an offer, invitation or inducement to engage in any investment activity and is solely for the purpose of providing information about the Company.

This document does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any share in the Company or securities in any other entity, in any jurisdiction.

The Company is a closed-ended investment company incorporated and registered in Guernsey and is governed under the provisions of the Companies (Guernsey) Law, 2008 (as amended), and the Registered Collective Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission ("GFSC"). It is a non-cellular company limited by shares and has been declared by the GFSC to be a registered closed-ended collective investment scheme. The Company's shares are admitted to the Official List of the UK Listing Authority with a premium listing and are admitted to trading on the Premium Segment of the London Stock Exchange's Main Market for listed securities.

Neuberger Berman Europe Limited ("NBEL"), the Company's Manager, is authorised and regulated by the Financial Conduct Authority ("FCA") and is registered in England and Wales, at Lansdowne House, 57 Berkeley Square, London, W1J 6ER and is also a Registered Investment Adviser with the Securities and Exchange Commission ("SEC") in the U.S. and regulated by the Dubai Financial Services Authority.

This document is addressed to professional clients only.

This document is presented solely for information purposes and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security.

We do not represent that this information, including any third party information, is complete and it should not be relied upon as such. Any views or opinions expressed may not reflect those of the Company or NBEL as a whole. All information is current as of the date of this material and is subject to change without notice. No part of this document may be reproduced in any manner without prior written permission of the Company and NBEL.

An investment in the Company involves risks, with the potential for above average risk, and is only suitable for people who are in a position to take such risks. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of any investment, and should consult its own legal counsel and financial, actuarial, accounting, regulatory and tax advisers to evaluate any such investment. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. Investment in the Company should not constitute a substantial proportion of an investor's portfolio and may not be appropriate for all investors. Diversification and asset class allocation do not guarantee profit or protect against loss.

Past performance is not a reliable indicator of current or future results. The value of investments may go down as well as up and investors may not get back any of the amount invested. The performance data does not take account of the commissions and costs incurred on the issue and redemption of units.

The value of investments designated in another currency may rise and fall due to exchange rate fluctuations in respect of the relevant currencies. Adverse movements in currency exchange rates can result in a decrease in return and a loss of capital.

Tax treatment depends on the individual circumstances of each investor and may be subject to change, investors are therefore recommended to seek independent tax advice.

This document, and the information contained therein, is not for viewing, release, distribution or publication in or into the United States, Canada, Japan, South Africa or any other jurisdiction where applicable laws prohibit its release, distribution or publication, and will not be made available to any national, resident or citizen of the United States, Canada, Japan or South Africa.

The distribution of this document in other jurisdictions may be restricted by law and persons into whose possession this document comes must inform themselves about, and observe, any such restrictions. Any failure to comply with the restrictions may constitute a violation of the federal securities law of the United States and the laws of other jurisdictions.

The Company's shares have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"), or with any securities regulatory authority of any state or other jurisdiction of the United States. The shares may not be offered, sold, resold, pledged, delivered, distributed or otherwise transferred, directly or indirectly, into or within the United States, or to, or for the account or benefit of, US persons (as defined in Regulation S under the Securities Act). No public offering of the shares is being made in the United States.

The Company has not been and will not be registered under the US Investment Company Act of 1940, as amended (the "Investment Company Act") and, as such, holders of the shares will not be entitled to the benefits of the Investment Company Act. No offer, sale, resale, pledge, delivery, distribution or transfer of the shares may be made except under circumstances that will not result in the Company being required to register as an investment company under the Investment Company Act. In addition, the shares are subject to restrictions on transferability and resale in certain jurisdictions and may not be transferred or resold except as permitted under applicable securities laws and regulations. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdictions.

The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman Group LLC.

© 2021 Neuberger Berman Group LLC. All rights reserved.

 

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