TIDMNBMI
RNS Number : 9927C
NB Global Monthly Income Fund Ltd
17 October 2022
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR
INDIRECTLY, TO U.S. PERSONS OR INTO OR IN THE UNITED STATES,
AUSTRALIA, CANADA OR JAPAN.
17(th) October 2022
NB Global Monthly Income Fund
Monthly Commentary & Portfolio Update
30(th) September 2022:
Key statistics
NAV (GBP) GBP 0.8054
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Current Portfolio Yield** 9.20%
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Number of Investments 235
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Number of Issuers 180
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Asset allocation:
Global High Yield: 20.48%
Global Floating Rate
Loans: 25.72%
Total Traditional Credit: 46.20%
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Private Debt: 26.55%
CLO Mezzanine Debt: 11.22%
Special Situations: 16.03%
Total Alternative Credit: 53.80%
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Credit rating breakdown: as at 30 September (excluding cash),
the portfolio was invested primarily in B (46.78%), BB (11.91%) and
CCC (35.62%) rated investments (.)
Market Update
September was a challenging month for non-investment grade
credit markets with returns broadly negative. The drawdowns were
driven by increasingly hawkish central banks and rising risk of
recession especially after Federal Reserve Board Chair Powell
mentioned the word "pain" several times in his most recent
statements and indicated the Fed is more willing to accept a weaker
labour market as it moves into a "restrictive range" on target Fed
funds. U.S. 10-Year Treasury yields ended the month at 3.83%,
rising 95 basis points since the end of the second quarter when the
yield stood at 2.88%. Also, news that the Bank of England had to
intervene in the long-end of the gilt curve to restore market
functioning fuelled incremental quarter-end volatility. UK gilts
experienced a significant yield increase over the quarter moving
from 2.10% at the end of the second quarter to 4.08% as of
September 30. Despite the fact that trailing 12-month default rates
have moved up from the lows, issuer fundamentals of free cash flow,
interest coverage and leverage have remained in relatively
favourable ranges with the default outlook for 2022 and 2023 still
below the long-term average.
In the month, U.S. senior floating rate loans-measured by the
Morningstar LSTA U.S. Leveraged Loan Index (the "LLI")-returned
-2.27% with the lower rated tiers underperforming as the BB, B and
CCC rated segments of the index returned -1.19%, -2.77% and -2.36%,
respectively. In the third quarter, the overall loan index saw
positive returns of 1.37% with BB's up 2.45%, and single-B's up
1.18%, outperforming CCCs which saw negative returns of -1.72%.
Year to date, the LLI returned -3.25% with lower rated loans
underperforming as the BB, B and CCC returned -0.90%, -3.76% and
-10.16%, respectively. The LL100, a measure of the largest, most
liquid issuers, returned -2.85% in the month, 1.29% for the quarter
and -4.26% year to date. The Morningstar European Leveraged Loan
Index (the "ELLI") returned -3.49% in September, 1.25% for the
quarter and -6.34% year to date, excluding currency effects. The
second lien loan index returned -3.02% in the month, -1.97% in the
third quarter and -7.22% year to date. Notwithstanding the macro
volatility, the loan market has been relatively resilient compared
to other asset classes over the month, quarter and year to date
periods.
The ICE BofA Global High Yield Constrained Index finished the
month with a return of -4.21%, -1.02% in the third quarter and
-15.74% year to date (Hedged USD). In September, returns across
credit ratings saw lesser drawdowns in the middle-rated credit
tiers as the BB, B, CCC & lower categories of the ICE BofA
Global High Yield Index returned -4.26%, -4.03%, and -4.76%,
respectively. Year to date, the BB, B, CCC & lower rated
categories of the ICE BofA Global High Yield Index returned
-15.71%, -15.74%, and -16.51%, respectively.
CLO debt spreads moved wider in the month, as the market rally
from July into mid-August-underpinned by market views of a more
dovish Fed and better than expected corporate earnings-was reversed
following hawkish comments from Fed Chairman Powell given
persistently elevated inflation. Secondary non-investment grade CLO
trading volumes declined 22% quarter-over-quarter with investors
reassessing selling needs as CLO debt spreads reached local wides
in 2022. The CLO BB index returned -6.81% in September, -2.56% in
the third quarter and -9.63% year to date.
Although default rates have moved up modestly from earlier in
the year, they remain low across non-investment grade credit which
is consistent with healthy balance sheets and positive free cash
flow growth. Our outlook for defaults also remains relatively
benign with well-below average default rates expected in 2022 and
2023. Non-investment grade credit, especially given its lower
duration profile and attractive yields, could likely see a
re-emergence of investor demand as valuations have become very
attractive on an absolute and relative basis.
In our view, non-investment grade yields are compensating
investors for the below average default outlook, will continue to
provide durable income and are attractive compared to other fixed
income alternatives. While the tightening of financial conditions,
still-elevated inflation and challenging news out of Europe has
been creating incremental volatility, real growth is slowing and
most supply chains have normalized. That said, our analysts
remained focused on the outlook for issuer margins even though some
input cost pressures appear to be lessening. Healthy consumer and
business balance sheets, growing nominal GDP and solid job growth
should remain supportive for issuer fundamentals. Our global
research team has also been closely monitoring the investment
thesis for each issuer in the portfolio given the margin impacts
related to input cost pressures exacerbated by the ongoing conflict
in Eastern Europe. While inventories are building as a result of
slowing demand, we remain focused on sector dynamics and
idiosyncratic risks to individual issuers. Even with the heightened
uncertainty of commodity prices, central bank tightening and
negative news flow out of Europe, which is resulting in short-term
volatility, we believe our bottom-up, fundamental credit research
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 the increased volatility.
Portfolio Positioning
The overall Fund exposure to floating rate assets is unchanged
at 67%, with an average duration of 1.45 years. As government bond
yields continued to rise on the back of heightened inflationary
concerns, and investors grappled with a range of other challenges,
including political instability in the UK and a flare up of
tensions in Ukraine, credit markets weakened in September. The
technical picture in the leveraged finance space was negative,
investors persistently being hit with outflows, which in concert
with reduced street balance sheet saw liquidity diminished.
Decompression was also evident, as accounts sought to reduce
exposure to lower rated and cyclical sectors, with several negative
idiosyncratic situations resulting in increased price dispersion.
During the month our exposure to single B rated holdings fell,
whilst the weight in BB rated names increased, as did our weight in
private debt.
As activity in the primary market remained highly subdued, we
did nevertheless add to selected lines in secondary, including the
unsecured bonds of energy group Harvest Midstream following the
announcement of a strong set of earnings. Harvest operates
midstream assets primarily in mature basins, and benefits from a
history of extending the useful life and productivity of
conventional assets, substantial free cash flow generation, a
sensible leverage profile and sympathetic covenant structure.
To access the September 2022 Factsheet, please click here
http://www.rns-pdf.londonstockexchange.com/rns/9927C_1-2022-10-14.pdf.
The Fund's website can be found at the following address:
www.nbgmif.com
For more information, please refer to here.
** 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 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 realised 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 not a reliable indicator of current or
future results.
-S-
For further information, please contact:
Neuberger Berman Europe Limited (Manager)
Elizabeth Papadopoulos +44 (0) 20 3214 9078
Numis Securities Limited (Broker)
Hugh Jonathan
Matt Goss +44 (0) 20 7260 1000
Praxis Fund Services Limited (Company Secretary)
Matt Falla
Gemma Woods +44 (0) 1481 737 600
KL Communications (PR)
Charles Gorman
Charlotte Francis +44 (0) 20 7995 6673
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
$460 billion in client assets as of December 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
Source of all data and charts (unless stated otherwise):
Neuberger Berman Europe Limited, Bloomberg and Blackrock
Aladdin.
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.
This product is only suitable for institutional, professional and
professionally advised retail investors, private client fund
managers and brokers who are capable of evaluating the merits and
risks of the product and who plan to stay invested until the end of
the recommended holding period and can bear loss of capital. An
investor with reasonable knowledge of loans and alternative credit
would need to be assessed by the advisor or distributor to
establish suitability for this product.
Full product details, including a Key Information Document, are
available on our website at www.nbgmif.com .
Due to the inherent risk of investment in the debt market
particularly related to alternative credit, it is expected that a
qualified investor would be able to understand the risks in such
security types and the potential impact of investing in the
product. This product is designed to form part of a portfolio of
investments.
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 is authorised and regulated by
the Financial Conduct Authority and is registered in England and
Wales, at The Zig Zag Building, 70 Victoria Street, London, SW1E
6SQ.
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 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.
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
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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.
(c) 2022 Neuberger Berman Group LLC. All rights reserved.
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END
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