NCYF Cqs New City High Yield Fund Limited

28 May 2024

CQS New City High Yield Fund Limited
("NCYF" or the "Company")

Monthly Fact Sheet as at 30 April 2024

The Company's Fact Sheet as at 30 April 2024 has been submitted and is available for inspection on the Company's website: https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd/.

The investment manager updates on the wider macro-economic environment and on key changes to the portfolio positions as at 30 April 2024.

Ian Franco Francis, Investment Manager at New City Yield Fund comments:  

"The overall economy in the UK looked more positive in April with the S&P Global Flash UK PMI composite output index at an 11-month high of 54 up from an already positive 52.8 in March. Sadly, again this masks the two-speed economy with growth in the service sector more than offsetting the return of weakness in manufacturing.

Cost pressures across the board inf driven by wage inflation following the increase in the National Minimum Wage may not encourage the Bank of England to cut rates in the short term, although they have hinted that this may come in the June meeting, s this will increase the likelihood that we will see an increase in inflation in the coming months.

A little further out it seems highly likely that we will see a change of Government to Sir Kier Starmer's Labour party, a lot will depend on the size of the majority, which is expected to be substantial. This will however not be bad news for markets as this will give the far left of the party less ammunition to swing policies their way. International investors will however be cautious of a Labour government and will need convincing that the UK is a good place to invest and Sterling will be the gauge of this.

The eurozone got off to a more positive start to the second quarter, again driven by services which delivered growth while manufacturing remained in the doldrum. The most positive comment that can be made from the figures is that production fell at its lowest rate for a year. Away from the two largest economies of Germany and France, inflation was seen to be rising more steeply as the service sector had confidence to pass on higher wage costs to end users. This will put pressure on the European Central Bank (ECB) to not hold rates in June, as has been widely forecast, but given the noises coming from the ECB currently a cut is still on the cards, which is most likely to help the manufacturing sector recover.

In the United States, the positive momentum of the economy was dented at the start of the second quarter as demand in both services and manufacturing was off the top, although still growing. Factors affecting inflation also have changed. The services sector has seen wage-driven pressure decreasing, while in manufacturing, the increases in fuel and raw material prices continue to grow at a faster rate for three out of the last four months, the inverse of what is currently driving the economies of western Europe. Those previously forecasting seven rate cuts this year at the end of 2023 are now forecasting just one in the fourth quarter, a result of stickier than expected inflation, much of which has been caused by geopolitical events in the Middle East.

For the Company competing bids for Hipgnosis Songs Fund enabled us to sell the holding for a sensible profit. The funds from this were reinvested into Next Energy Solar fund which was trading on a 30% discount to its NAV and giving a yield of 10.9%, which we believe offers good value, while it has recently also rolled its RCF debt at a competitive level. We also invested in 3t Global 11.25% FRN 2028, a global leader in high impact training for safety critical industries particularly oil, gas and wind energy and industrials. We continue to see sensible opportunities in the market while rates remain at higher levels for longer.

-ENDS-

About CQS New City High Yield Fund Limited

CQS New City High Yield Fund Limited aims to provide investors with a high dividend yield and the potential for capital growth by investing in high-yielding, fixed interest securities. These include, but are not limited to, preference shares, loan stocks, corporate bonds (convertible and/or redeemable) and government stocks. The Company also invests in equities and other income-yielding securities.

Since the Fund's launch in 2007, the Board has increased the level of dividends paid every year. As at 31 December 2023, the Fund's dividend yield is 9.13%. In addition to quarterly dividend payments, the Fund seeks to deliver investors access to a high-income asset class across a well-diversified portfolio with low duration to help mitigate interest rate risk.

Further information can be found on the Company's website at https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd/