Portfolio Update

RNS Number : 1607X

NB Global Floating Rate Income Fund

10 February 2012

 



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

NB Global Floating Rate Income Fund

Portfolio Update

NB Global Floating Rate Income Fund Limited (the "Fund") is a Guernsey incorporated closed-ended investment company. The Fund targets an annualised net yield per share in the region of 5% on the issue price in the first full year of investment, plus capital appreciation, while seeking to protect investors from rising interest rates.

The Fund's managers expect to generate this yield by investing in a global portfolio of more than 100 senior secured corporate loans with selective use of senior bonds, diversified across at least 15 industry sectors. The Fund is managed by three accomplished portfolio managers backed by a credit team of over 30 investment professionals.

The Portfolio as at 31 January 2012:

u was split 89.8% USD, 6.7% EUR and 3.5% GBP

u was diversified across 32 industries with no industry representing over 13% of the portfolio

u had 12% allocated to bonds out of the maximum 20% allowable

was invested primarily in Ba (38.3%) and B (53.9%) rated investments¹

Market Environment²

Loan performance in January was strong globally with the US S&P/LSTA Loan Index returning 2.2% for the month and the S&P European Leveraged Loan Index (ELLI) returning 2.6%. Breaking down the US Index further shows that the top 100 names, where our investments tend to be concentrated, performed even better with a return of 2.9%. 

This strong performance, particularly in the context of 2011 full year returns of 1.52% in the US and 0.72% in Europe, is due to a "risk-on" trade. This has been driven by positive news out of Europe, such as the extension of the ECB's 3 year credit facilities, and the continuing, strong economic data from the US, which includes solid earnings reports and positive employment numbers. In addition, the month's $5.8bn of new institutional paper in the US was light relative to demand, although we saw activity pick up at the end of January and into February. Managers had built up cash in anticipation of a more active US new issue calendar than that which materialised, driving investors to buy loans in the secondary market. Europe experienced a similar technical picture, albeit with a limited pipeline of €1.2bn.

Our view on defaults for 2012 remains unchanged and, whilst the US lagging 12 month default rate ticked up marginally to 0.21% from 0.17%, we remain comfortable with our default by volume projection of less than 2.0% for the market. The ELLI default rate remained constant on the year end at 4.1%. Our European market forecast for defaults remains between 5 - 7% in 2012.

Investment Pipeline

We have used the rallies in both the US and European loan and high yield markets to reduce the beta in the portfolio. Specifically, we have reduced our exposure to high yield bonds from 18% in July 2011 to 12%, as yields have tightened significantly and, in our opinion, relative value between bonds and loans currently favours the latter. We have also reduced our exposure to Europe from 17% in July 2011 to 10% which we felt prudent, given that Europe has less economic clarity than the US.

Any cash generated from sales and repayments is being re-invested in the pipeline of new issuance in the US (which stands at $10.0bn) where we continue to see yields of 6.0% to 7.0% for single B rated names and 4.0% to 5.0% for double B's. Our focus remains on the primary market, where we continue to see greater value than the secondary market, particularly after January's rally.

The C Shares converted into Sterling Shares and US Dollar Shares on 16 January 2012

1. Moody's Investors Service.

2. Source: Standard & Poor's.

-ENDS-

For further information please contact:

Neuberger Berman Europe Limited          [phone]

Anji Stewart

FTI Consulting                                              [phone]

Neil Doyle                   

Ed Berry

Laura Pope

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 $193 billion in assets as of December 31, 2012. 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. 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.

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. © 2012 Neuberger Berman.

 

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