Positive results for City Merchants High Yield- In his first final report the new chairman of City Merchants High Yield (CMHY), Tim Scholefield commented that high yield bonds yields and spreads over investment grade bonds had reached new lows against a backdrop of surprising economic growth and supportive central bank policy. He mirrored the caution expressed by the manager that prices of high yield bonds were getting to be on the high side and, by association, yields were low.
In reaction to this environment, the manager had taken a defensive stance during the years under review. The NAV had returned 8.7% compared with a total return of 7.6% for the Bank of America Merrill Lynch European Currency High Yield Index. A slight increase in the premium to NAV saw the share price return 9.9% over the year. The share price traded at an average premium to net asset value of 1.6% during the year. The chairman noted that demand for investment trusts offering relatively high and stable income remained strong and speculated that this was a “feature…. of a world in which interest rates have been close to, and in some cases below zero in the aftermath of the Global Financial Crisis.” The company has performed well over three and five years also.
Investment Style
The Manager seeks to ensure that the portfolio is diversified, having regard to the nature and type of securities (including duration, credit rating, performance and risk measures and liquidity) and the geographic and industry sector composition of the portfolio. The Company may hold both illiquid securities (for example, securities where trading volumes are relatively low and unlisted securities) and concentrated positions (for example, where a high proportion of the Company’s total assets are comprised of a relatively small number of investments).
CMHY : Positive results for City Merchants High Yield