Results analysis from Kepler Trust Intelligence

RNS Number : 7733L

NB Global Monthly Income Fund Ltd

15 September 2021

 

NB Global Monthly Income (NBMI)

15/09/2021

Results analysis from Kepler Trust Intelligence

NB Global Monthly Income has reported strong results for the half year ending 30 June, with a 4.7% NAV total return per share and covered dividends paid in line with expectations. The share price discount narrowed over the period to from 13.1% to 9.2% as of 30/06/2021, and has since narrowed further to 6.2% as of 13/09/2021.

The managers used the flexibility of their mandate, which allows them to allocate across public and private debt markets. During the period, the exposure to floating rate loans fell markedly, with the managers rotating into private debt and CLOs, as well as global high yield bonds. However, the exposure to floating rate assets remains high, at 66%, and the portfolio's duration is low at 1.05 years.

Kepler View

In our view NBMI is an attractive source of high yield for income-seekers which offers valuable diversification into hard-to-access sectors. It does bring with it credit risk as well as the risks of investing in specialist, more illiquid markets, but the team is exceptionally well resourced to manage those risks.

It is positive to see the allocations to alternative credit - private credit and CLOs - rising over the period, as these are the areas which really set NBMI apart from most of the options available to the UK mass market. Both areas should be able to offer higher yields thanks to the complexity involved in analysing, pricing and implementing a deal, as well as the illiquidity of the assets.

In our view, the trust is particularly well suited to a benign hiking cycle, in which the economy is growing fast and rate hikes are used to slow it down. Low duration will limit the negative impact of interest rate rises, while credit spreads are likely to tighten if the economy is doing well. The wide remit means that higher yielding sectors are available to the managers and shareholders of the trust, including some that are typically hard to access for the mass market.

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