CIFU : Carador Income Fund provides modest returns during H1 2014
Carador Income Fund provided a total return of 3.67% during the first half of 2014. This comprised a fall in NAV of 2.12% during the period (from US$0.9466 to US$0.9265 per share) combined with dividends of US$0.0540 per share. CIFU’s shares closed the first half of 2014 at US$0.8975, a 3.13% discount NAV. The annualized historic dividend yield on the US$ shares, based on the last declared divided, was 12.59%.
Since the EGM in June 2013, the manager has been implementing a process of portfolio rotation, reducing exposure to pre-financial crisis CLO Income Notes (that are rapidly deleveraging), and adding post-financial crisis deals. The Manager believes this will provide for more sustainable income generation and NAV stability going forward. During the first half of 2014, 23 investments were added to the portfolio (total market value US$244.7m), whilst 26 investments were sold (for US$136.6m). As at 30 June 2014, CIFU’s portfolio, by value, was 65.4% income notes, of which, 63.3% are post financial crisis deals. The manager believes that that the U.S. loan market is now offering little capital upside even at the riskier end of the spectrum but that downside also seems limited given both the robust cashflow coverage of debt and the long dated maturities.
Carador Income Fund invests in a diversified portfolio of equity and mezzanine tranches of CLOs, and the senior tranches of cashflow CLO transactions, backed by senior secured leveraged loans. Its investment objective is to produce attractive and stable returns with low volatility compared to equity markets. Carador, through its investments, offers investors exposure to a diversified portfolio of primarily senior secured loans, financed on a term, non-recourse, non-mark to market basis.