Between 31 December 2014 and 31 December 2015, NB Global Floating Rate Income’s NAV per share dropped by 3.77% and 3.56% for the U.S. Dollar Ordinary Share and Sterling Ordinary Share, respectively. The NAV return plus dividends declared in the year was 0.08% and 0.32% for the U.S. Dollar Ordinary Shares and Sterling Ordinary Shares, respectively.
During 2015, the annualised dividend yield of the company on dividends paid during the year 1 January 2015 to 31 December 2015 was 4.11% (based on a share price of $0.9238) for the U.S. Dollar Ordinary Shares and 4.13% (based on a share price of GBP0.9175) for the Sterling Ordinary Shares, which we believe is attractive given current market conditions.
The investment manager says the US loan market, as measured by the S&P/LSTA Leveraged Loan Index, returned -0.69% for 2015. After a solid start to the year, market sentiment was generally “risk off” during the second half of the year. This was driven by debt renegotiations in Greece, concerns around China’s future growth prospects and continued downward pressure on oil prices. As such, while loan investors continued to earn a stable level of income and defaults in the asset class remained below historical levels, any interest earned was negated by market value losses. On a more positive note, the benefits of being senior secured and top of the capital structure were apparent, as loans outperformed high yield in 2015. The US trailing 12 month default rate ended 2015 at 1.54% by amount outstanding and 1.19% by number of issuers, well below the historical averages of 3.14% and 2.79%, respectively.
In Europe, the S&P European Leveraged Loan Index showed more stability and recorded a full-year total return (excluding currency) of 4.62%, which was generated by income. As they have reported before, a combination of a smaller market, the absence of a retail buyer base and a sustained collateralized loan obligation (CLO) bid all supported European performance during 2015. Default rates in Europe were 2.10% and 1.99% by volume and issuers, respectively, in 2015, versus 4.88% and 3.74% at the end of 2014.
During 2015, the portfolio remained very much weighted towards US Issuers which accounted for 93.59% of the portfolio as of 31 December 2015. The bond allocation remained well below the 20% of NAV permitted, at 4.67%, as we remained focused on keeping duration low and limiting potential areas of volatility. The key movement was in the portfolio allocation by rating and, whilst the weighted average rating is still B+, they took the opportunity to allocate to higher-rated assets. As such, the BBB/BB weighting increased from 40.68% of the portfolio at the end of December 2014 to 48.17% at the close of 2015, which they think should make the portfolio more defensive. They believe we were able to do this without sacrificing yield.
Despite a somewhat underwhelming performance by the loan asset class in 2015, they say they are of the view that the Company performed well from a NAV perspective and recorded a 0.75% (before fees) total return versus the -0.69% for the Index. We believe this out performance was a combination of positive credit selections, their higher quality bias and remaining underweight to more problematic sectors, such as Oil & Gas.
NBLS / NBLU : NB Global Floating Rate Income reports flat return for 2015