TwentyFour Income Fund has announced its interim results for the six months ended 30 September 2016. During the period, the company’s NAV increased by 6.3% to 110.23p per share and it also declared 3p of dividends. The share price increased by 5.9%.
The company’s chairman, Trevor Ash, says that for the majority of the period the company’s shares continued to trade at a premium, as they had done since launch, with the average premium during the period being 2.08%. He says that the premium was less volatile than during the previous year due to the company’s ongoing programme of issuance. He says that the Board is comfortable that a reasonable premium has been established, but remains willing to continue to issue further shares, subject to the Portfolio Manager confirming that attractive investment opportunities are available in the market.
Trevor Ash says that, at the start of the period the Asset Backed Securities (ABS) market, along with all other financial markets, was undergoing a material increase in yields, as risk sentiment had deteriorated in the first quarter of 2016. He says that this was largely driven by factors outside of the ABS market, but led to a significant improvement in opportunities in European ABS, buoyed by continued strong fundamental performance of the underlying assets.
However, the general recovery in sentiment seen during the quarter to end of June was curtailed by the shock result of the UK referendum on EU membership but, following the further expansion of supportive policies from the Bank of England, a recovery in sentiment again allowed European ABS spreads to perform well. He says that, towards the end of the period there remained a material credit spread premium available to investors in the ABS market in comparison with corporate credits with similar ratings.
In terms of outlook, the chairman says that the ongoing investment opportunity remains extremely attractive, however instability remains in global financial markets, driven most recently by a resurgence in uncertainty regarding the timing of the UK’s exit from the EU and its subsequent relationship with the single market. This may again create volatility in markets and further buying opportunities within ABS, and indeed might present a good opportunity for further growth of the Company.
Looking forward, the portfolio manager reportedly expects the pipeline of new issuance to remain elevated over October and early November, particularly with UK non-prime RMBS and CLO supply. The manager believes that the demand for bonds is likely to remain strong as there are new buyers entering the market and that a slowdown in primary issuance towards the latter end of 2016 should create a strong technical lift for the ABS market.
TwentyFour Income Fund benefits from performance of European ABS market TFIF