Portfolio Update - September 2021

RNS Number : 2425P

NB Global Monthly Income Fund Ltd

18 October 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.

18^th October 2021

NB Global Monthly Income Fund*

Monthly Commentary & Portfolio Update

30^th September 2021:

Key statistics

NAV (GBP)	GBP 0.9550
Current Portfolio Yield**	6.13%
Number of Investments	304
Number of Issuers	209

Asset allocation:

	Global High Yield:		30.99%
	Global Floating Rate Loans:		36.15%
Total Traditional Credit:			67.14%
	Private Debt:		18.87%
	CLO Mezzanine Debt:		10.32%
	Special Situations:		3.67%
Total Alternative Credit:			32.86%

Credit rating breakdown: as at 30th September (excluding cash), the portfolio was invested primarily in B (47.51%) and BBB/BB (15.18%) rated investments ¹

Market Update

Most of non-investment grade credit finished the month of September in positive territory-with some exceptions regionally and by credit rating tier-even as concerns over slowing global real GDP growth given supply chain constraints, the Evergrande default in China, general uncertainty about COVID and the stalemate in D.C. all weighed on risk sentiment.  Despite the moderation in growth expectations from prior elevated levels, global real GDP growth remains well above trend. While higher commodity and durable goods prices are causing some demand destruction at the margin, we continue to see a positive backdrop for non-investment grade issuer fundamentals. All categories of non-investment grade credit saw positive returns in the third quarter.

In the month of September, U.S. senior floating rate loans, as measured by the S&P/LSTA Leveraged Loan Index (the "S&P LLI"), returned 0.64% as lower rated tiers performed in line with or outperformed the index. The BB, B and CCC rated segments of the index returned 0.52%, 0.64% and 1.39%, respectively. The LL100, a measure of the largest, most liquid issuers, returned 0.63% which performed in line with the total S&P LLI. For the third quarter and year to date periods, the S&P LLI provided returns of 1.11% and 4.42%, respectively. The European Leveraged Loan Index (the "ELLI") returned 0.37% in September, 1.02% in the third quarter and 4.01% year to date, excluding currency effects. The Second Lien Loans index was up 0.82% in the month, 2.19% for the quarter and 11.45% year to date.

The global high yield bond market finished the month of September with modestly negative returns as concerns over slowing global growth, higher inflation and uncertainty about COVID outweighed the positives of favourable fundamentals. The ICE BofA Global High Yield Constrained Index finished the month, quarter and year-to-date periods with returns of -0.43%, 0.21% and 3.38%, respectively. Returns across rating tiers in the quarter were quite disperse with the highest and lowest quality outperforming the index. In the third quarter, the BB, B, CCC & lower rated categories of the ICE BofA U.S. High Yield Index returned 0.62%, -0.67%, and 0.38%, respectively.

CLO debt had another stable quarter, with the asset class benefitting from the increased potential of higher near-term rates and strong underlying fundamental performance as well as continued attractive relative value versus other fixed income assets. While primary volumes continue to set records, spread levels remained steady over the third quarter with strong investor demand.  Secondary market activity remained robust over the course of the quarter.  The CLO BB Index gained 0.37% on the month, 1.89% over the third quarter and 9.59% year to date.

The pace of defaults and default expectations continued to moderate in both U.S. and European non-investment grade credit markets, which is consistent with improving fundamentals. Non-investment grade credit, especially given its lower duration profile and attractive yields, will likely continue to see favourable investor demand, especially given that ~60% of the global bond market still yields less than 1%.

Non-investment grade credit yields are compensating investors for the increasingly benign default outlook, will continue to provide durable income and are especially attractive compared to other fixed income alternatives. While inflation is more persistent than previously expected, the trajectory of real GDP growth and improved pricing power should be supportive of issuer fundamentals. Continued progress on vaccinations plus the release of a booster shot, combined with pent-up demand, a strong consumer, businesses working to rebuild inventories and rehire plus more communicative central banks on taper timing should continue to support economic activity going forward. Our global research team continues to monitor the investment thesis for each issuer in the portfolio given the uncertainty around the pandemic and its impact on supply chains and demand, especially in certain consumer-facing sectors such as travel, lodging, leisure, entertainment, and those impacted by higher prices such as housing and autos. While the Delta variant of COVID continues to be the persistent strain, cases have begun to slow from prior elevated levels. Even as concerns over higher inflation, tight supply chains and geopolitical risk from China could result in pockets of short-term volatility, we believe our bottom-up, fundamental credit research process focused on security selection while seeking to avoid credit deterioration and putting only our "best ideas" into portfolios, position us well to take advantage of any volatility.

Portfolio Positioning

The overall Fund exposure to floating rate assets is at 66%, leading to an average duration of 1.2 years. Although Floating Rate Loans remain the largest proportion of the portfolio at 36.2%, their weight fell month on month as the team added to our allocation to Private Debt and CLO Debt Tranches. Our allocation to Global High Yield also increased during the period at the expense of Special Situations. In terms of ratings breakdown, our exposure to CCC risk increased during the month to 31.9%, whilst the holding in single B rated credit fell to 47.5%. Although the new issue markets in Europe were slow to take off in September, they were busier in the US, and the portfolio did participate in several deals in both markets including in Medline, widely reported as one of the largest LBO transactions since the financial crisis.

Recent Investments

Whilst seeking to increase our exposure to 2nd lien term loans from names upon which we have a favourable opinion, we added to RealPage, a software group that sells and develops software for real estate owners across the rental cycle. Our constructive opinion is underpinned by a high level of recurring revenue, strong renewal rates, and leading market positions, providing software to a diverse set of customers in a growing market. Their SaaS-based software includes a wide array of mission-critical and value-added services, including core property management, leasing/marketing, payments and various analytics, and there is a clear opportunity to expand within their addressable market. The company has been gaining share and gradually consolidating a fragmented market via tuck-in M&A, which has been driving strong revenue and EBITDA growth. Solid performance has persisted through the pandemic, with the company delivering high single digit organic revenue growth last year and in the first half of this year.

We also added an allocation to the 2nd lien term loan of Mold-Rite in September, a packaging group specialising in injection moulded caps and closures. Our favourable view of the Mold-Rite business is based on the company's history of favourable organic growth, relatively low capital intensity for the packaging industry, strong EBITDA margins, and wide product portfolio. The company has grown sales and EBITDA organically over the last 5-years, and we believe that the business should be able to rapidly de-lever with continued organic growth, as following the LBO growth capex is modest relative to the incremental EBITDA generated from the investment.

To access the September 2021 Factsheet, please click here http://www.rns-pdf.londonstockexchange.com/rns/2425P_1-2021-10-15.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 Will Sanderson	[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 $402 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 The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ 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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