TwentyFour Income Fund has released its interim results for the half-year ended 30 September 2015. During the period the company provided an NAV total return of -1.6%. The Company’s shares have continued to trade at a premium, as they have done since launch, with the average premium during the period being 5.9%. The Board anticipates paying a third interim dividend of 1.5p per share in January 2016, with a balancing fourth dividend for the year payable in April. The board say that they take significant comfort that the fundamental performance of the asset pools ,backing the Company’s investments, continue to perform well, and that the drivers for future performance continue to strengthen. As a result, they say that the outlook for the Company is to take advantage of the more attractively priced investment opportunities, and to look for a recovery in prices as market sentiment recovers.
The board also say that, in anticipation of the Company’s third anniversary in March 2016, at which date Shareholders have the right to elect to have their shares realised, the Board has been considering the Company’s policies and structure and, following a review and consultation with major shareholders, they intend to put forward proposals by the end of November 2015 which would include certain changes to the Company’s investment policy. These would provide greater flexibility and reflect the evolving investment opportunity in European ABS. They say that, if the changes are approved, the Portfolio Manager intends to use them only gradually and that it is expected that the portfolio will continue to be significantly backed by UK and Northern European collateral, whilst retaining a significant exposure to residential and commercial mortgage-backed securities. The board say that, if the changes are approved, the Board expects to retain the Company’s target dividend of 6p per share in respect of the year ending 31 March 2017.
In terms of performance, the managers say that the fundamental performance of underlying asset pools however remained strong, and the drivers of these, particularly in the consumer space, continued to improve with employment, wage and house price data either stabilising or improving in the majority of geographies in which the Company invests. The disconnection between price/yield on one hand and credit risk on the other has materially improved the risk/return dynamic for large parts of the market, in their view.
In terms of outlook, the managers say that, as performance has largely been dictated by events external to the European ABS market, it would seem that in the short term concerns around global growth and the ability of central banks to achieve their aims of stability and inflation targeting could play a material role in price performance. They say that this does create opportunities to invest at more attractive levels than have been seen for a couple of years, adding to the yield of the Company. Anecdotally they say that investors that are new to European ABS, or who have not focussed on the sector for some time, are understood to be preparing to re-engage having seen the recent moves in price. They believe that thisshould help provide a floor for performance. Moreover, while the managers are not expecting that the Monetary Policy Committee will adjust the Bank Rate in 2015, they say that the company will benefit from this move when it does happen.
TwentyFour Income Fund to propose amendments to investment policy by the end of November : TFIF