Portfolio Update

RNS Number : 2788C

NB Global Floating Rate Income Fund

15 April 2013

 



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 FTSE 250-listed, closed-ended investment company. The Fund targets an annualised yield per share, net of fees and expenses, in the region of 5% per share per annum¹, whilst seeking to preserve investors capital and give protection from rising interest rates.

The Fund's managers generate this yield by investing primarily in a global portfolio of senior secured corporate loans with selective use of senior bonds, diversified by both borrower and industry. The Fund is managed by three accomplished portfolio managers backed by a credit team of over 30 investment professionals.

The Portfolio, as at 31 March 2013:

·     was split 92.65% USD, 4.10% EUR, 2.95% GBP and cash 0.30%

·     had 11.32% allocated to bonds out of the maximum 20% allowable

·     was invested primarily in B (58.53%) and Ba (36.43%) rated investments¹

Market Environment²

The loan markets started the year positively in both the US and Europe with the US S&P/LSTA Loan Index producing a total return of 2.11%, and the S&P European Leveraged Loan Index (ELLI) 2.52%. 

Flows this quarter have come from the usual sources in the US with CLOs and mutual funds bringing in some $38.9bn and pension fund/relative value investors still investing c$1-2bn per month. Additionally, the European CLO market has re-awoken from its slumber with two new CLOs pricing this quarter which has positive connotations for this market. This demand continues to be met by strong new issuance with a record $150bn of loans coming to market in the quarter versus $90bn in the same period last year. However, new M&A issuance remains limited and whilst Heinz came to the market in March it has yet to be followed by more new deals and so the majority of issuance has been from existing borrowers undertaking opportunistic refinancings which does put pressure on yields. In the secondary market, with the continued flow of funds into the asset class, market bids are high, particularly in the large, liquid segment that we favour. The average institutional flow name bid on the S&P/LSTA Index ended the quarter marginally over par, whilst in Europe the flow names are bid around the 99 level with no impact felt from the issues in Cyprus which dominated the news during March. Default rates in the US temporarily increased to 2.3% as three legacy directories businesses that had been trading at distressed levels commenced their expected restructuring processes. This will revert to below 2.0% over the next couple of months. Europe reduced from the year end rate of 6.6% to 5.9% at the quarter end and remains below our maximum 7% forecast. We have had no defaults in the portfolio since inception. 

Portfolio Management

The record new issuance we have seen has been of varying quality but has meant we can be even more selective in our credit picking which we believe is a strong position to be in. During the quarter we have started to see a pick up in quality issuance in Europe with Virgin Media and Kion both returning to market with fixed rate offerings. We participated in both of these and, accordingly, our exposure to the region increased to 7.1% from 4.6% at the year end. As we have maintained Europe will always provide good names to invest in but we will remain selective. As the majority of the new issuance has been refinancing led, we have seen a few more relative value opportunities in secured fixed rate bonds, including the ones mentioned above, and so our bond allocation has increased from 6.5% at the end of 2012 to 11.3%. Our maximum bond exposure allowable is 20% of NAV.

Outlook

As per our end of year review, we continue to have a positive outlook for the bank loan market. Fundamentals remain strong and the discussions we are having with the management teams leads us to believe that 2013 is off to a good start. Despite the marginal increase in default rates in the US, we do not believe that this indicates a deteriorating trend as the names that did enter are all from an industry in structural decline and not symptomatic of more sinister underlying macro issues. We are now expecting more issuance to come out of Europe during 2013, particularly if the new CLO issuance market continues, and arrangers do appear more confident in the pipeline albeit this is likely to be more bond weighted. Whilst we see discussions around the Fed withdrawing QE3 and the recent problems in Cyprus neither event has had a noticeable impact on the loan market and we expect Central Bank intervention to continue for the remainder of the year. We reaffirm our view that the largest contributor to performance in 2013 will be coupon payments.

Source: BNP Paribas and Bloomberg. Data as at 31 March 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 $205 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. 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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