CVC Income and Growth (CVCG), the top-performing listed loan and bond fund over five and ten years, has launched a £60m share issue in response to investor demand for high yields and a haven from volatile markets.
Having issued 39m shares in the past 12 months and seen its stock trade at a small premium this year, the £195m, 8.4%-yielder said it would look to place the remaining shares it holds in treasury after previous buybacks.
Separate to the placing to institutional shareholders will be a WRAP Retail Offer for private investors to buy the new shares free of 0.5% stamp duty.
The offer to buy new shares at a 0.65% premium over net asset value will be open until 21 October with the price announced on 17 October, three days after an extraordinary general meeting for shareholders to approve the issue of up to 20% of share capital.
The CVCG sterling share class had a net asset value of 119p at 31 July, according to its latest fact sheet. The shares opened 2p, or 1.7%, higher at 121.5p this morning.
Over five and 10 years they are the best performing in the six-strong Loans and Bonds sector with 86.4% and 107.6% total returns to shareholders compared to a group average of 59.4% and 63.5%.
The fund targets a medium-term total annual return of 8% and aims to produce income and capital from investments that are less volatile than the stock market.
In recent years the largely floating rate loan portfolio has been boosted by rising interest rates. It published good half-year results last week.
The company said it would deploy the new money in line with its existing policy of investing in performing “core” credits and credit opportunities, where it sees underpriced bonds and loans that can generate capital growth as well as income.
It currently targets an annual dividend of 9.25p per share, or 7.25 cents for the separate euro CVCE share class.
The share issue comes at a buoyant time for loan and bond funds which trade at an average 2% premium over net asset value. Rivals TwentyFour Select Monthly Income (SMIF), M&G Credit Income (MGCI) and Invesco Bond Income Plus (BIPS) have also issued shares on the back of good performance, making the sector a rare beacon of light amid the broader investment company where shares are mostly stuck on wide discounts and struggling with depressed investor demand.
In its recent half-year results, however, M&G Credit Income warned of investors becoming immune to the inherent risks of lending to companies amid an economic slowdown. “Current levels of market exuberance feel over done and in our opinion investors aversion to bad news is leading to complacency,” its fund manager Adam English said.
