Portfolio Update - May 2021

RNS Number : 8625B

NB Global Monthly Income Fund Ltd

15 June 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.

15^th June 2021

NB Global Monthly Income Fund*

Monthly Commentary & Portfolio Update

28th May 2021

Key statistics

NAV (GBP)	GBP 0.9529
Current Portfolio Yield**	6.17%
Number of Investments	286
Number of Issuers	203

Asset allocation:

	Global High Yield:		31.62%
	Global Floating Rate Loans:		42.54%
Total Traditional Credit:			74.15%
	Private Debt:		15.26%
	CLO Mezzanine Debt:		8.04%
	Special Situations:		2.54%
Total Alternative Credit:			25.85%

Credit rating breakdown: as at 28th May (excluding cash), the portfolio was invested primarily in B (50.04%) and BBB/BB (15.80%) rated investments ¹

Market Update

Non-investment grade credit ended the month in positive territory again and only experienced a very brief hiccup earlier in the month as investors digested a headline CPI print of 4.2%. While rising inflation and slightly more hawkish comments later in the month from 5 of the 7 U.S. FOMC members caused some short-lived volatility in fixed income broadly, improving issuer fundamentals and demand for yield with lower duration won the day. Additionally, better-than-expected earnings reports and attractive valuations propelled some non-investment grade credit sectors, especially those linked to reopening and stronger economic activity.

Senior floating rate loans resumed the rally in May on improving fundamentals, rising inflation, large positive retail inflows and strong new issue volume in CLOs. While the yield on the 10Y U.S. Treasury continued to back off from the 12-month high of 1.74%, finishing the month at 1.58%, investors are still seeking attractive yield opportunities with durable income and lower interest rate risk. U.S. senior floating rate loans, as measured by the S&P/LSTA Leveraged Loan Index (the "S&P LLI"), returned 0.58% in May with the lowest quality outperforming as BB, B and CCC returned 0.42%, 0.61% and 1.08%, respectively. The LL100, a measure of the largest, most liquid issuers, returned 0.56% which also underperformed the total S&P LLI. The European Leveraged Loan Index (the "ELLI") returned 0.43% in May, excluding currency effects. Year to date through May 31st, the S&P LLI returned 2.90% and the ELLI returned 2.69%, excluding currency effects. The Second Lien Loans index was up 1.11% in the month and 7.73% year to date.

The global high yield bond market rallied in May and also saw strong new issuance. The ICE BofA Global High Yield Constrained Index finished the month and year-to-date period with returns of 0.42% and 2.22%, respectively. Dispersion in returns across credit quality remained a feature of the market as the lowest quality issuers continued to rally with CCC and below rated issuers outperforming the broader index. The BB, B, CCC & lower rated categories of the ICE BofA Global High Yield Index returned 0.35%, 0.34%, and 0.99%, respectively.

CLO debt levels were stable for most of May, with the market adequately digesting the continued significant primary market activity. Fundamentally, the asset class has benefitted from the potential of higher near-term rates and strong underlying fundamental performance as well as continued attractive relative value vs. other fixed income assets. The CLO BB Index gained 1.18% over the month.

Defaults continued to decline materially in both U.S. and European non-investment grade credit, which is consistent with improving fundamentals. Non-investment grade credit, especially given its lower duration profile and attractive yields relative to other fixed income, will likely continue to see favourable investor demand, especially given that 65% of the global bond market still yields less than 1%.

Yield levels and spreads in non-investment grade credit are compensating investors for the very benign default outlook. The economic recovery continues to be proven by the recent economic data and we would expect an improving trajectory of growth and pricing power to be supportive of issuer fundamentals. Further progress on re-openings, combined with significant consumer pent-up demand for travel, leisure and services, businesses rebuilding inventories and rehiring plus patient central bankers should continue to support economic activity going forward. We believe the portfolio is well positioned to take advantage of these trends and record new issuance is continuing to provide attractive investment opportunities.

Portfolio Positioning

Floating rate loans remain the largest allocation for the Fund at 42.5% and the overall Fund exposure to floating rate assets is at 67% leading to an average duration of 1.1yrs for the Fund as a whole. Our current allocation to BBB/BB rated credits ended the month at 15.8% while our exposure to CCC and below rated names finished the month at 28.8% slightly down month on month. The exposure to floating rate assets and lower rated issuers has been accretive to portfolio performance so far this year. In May, the exposure to Floating Rate Loans decreased by 2% month on month in the most part due to sales of loans we exited above par from which the Fund rotated into various High Yield names increasing our exposure to names already owned at what we judged to be attractive levels. Financial Intermediaries became the top sector allocation this month at 10.9% though note that this is predominantly made up of CLO Debt tranches which fall into this classification. The fund continues to be active in the new issue markets which are on course for a record breaking year though fewer opportunities in primary were found in May in relation to March and April.

Recent Investments

Rodenstock is a leading manufacturer of ophthalmic lenses and a business the broader NB Non-Investment Grade platform has had exposure to since mid-2019. The company in May came to market to recapitalise following an acquisition of the company by Apax but for several factors we believe are more temporary in nature, pricing of the new transaction was widened/cheapened during the syndication process. The final terms of the deal of E+500bps and 97 new issue price for the 1st lien Term Loan in combination with an improvement in documentation we viewed as attractive risk reward for the fund as so NBMI has participated. There has been a v-shaped recovery in demand from the fragmented independent optician base for the company's products since May 2020 which we anticipate will continue and assist the company in reducing leverage.

The fund also took a new position in Duravant, a global provider of automated machinery to a diverse pool of packaging, material handling and food processing clients. A leveraged buy-out by Warburg Pincus in 2017, we are encouraged by the company's ability to grow organically and show solid cash conversion despite a series of levering transactions. We participated in a transaction to finance the acquisition of an equipment provider for the poultry industry by Duravant. The loan notes the fund has participated in have a L+650bps coupon, benefit from a 75bps Libor floor and were issued at 99.5.

To access the May 2021 Factsheet, please click here  http://www.rns-pdf.londonstockexchange.com/rns/8625B_1-2021-6-14.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 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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