Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by NB Global Monthly Income Fund. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

The board of NBLS is proposing a radical overhaul of the fund’s strategy which would see its mandate widened extensively in order to generate a high monthly income. In order to reflect the new mandate, the name of the fund would be changed to Neuberger Berman Global Monthly High Income Fund.

NBLS currently exclusively invests in floating-rate loans. Under the proposals the investment mandate would broaden to also include conventional fixed income (both investment grade and high yield), as well as CLOs, mezzanine debt and even private corporate loans arranged exclusively for Neuberger Berman via its extensive industry contacts. By investing in more esoteric segments of the fixed-income markets typically available mainly to institutional investors, the intention is to harvest the illiquidity premium to generate 150 to 200 more basis points of yield than that available on NBLS’s current portfolio – i.e. a gross yield of c. 6.6% at current levels.

NBLS would pay a monthly dividend under the proposals, with a target distribution set by the board at the start of each year based on its outlook for rates. The monthly distributions would start in October, with the first target set in January. It is expected to take four months to fully invest the less liquid alternative allocations.

Current shareholders will be offered a cash exit for up to 40% of their shares in a redemption offer as an alternative to participating in the new structure. An enhanced discount-management policy would see a tender offer of 25% at a 2% discount to NAV twice yearly. Should NBLS’s NAV fall below £150m as a result, wind-up proposals will be put forward.

Analyst's View

The board’s proposals for NBLS would create one of the most flexible fixed-income offerings on the market. In our view the Neuberger Berman Global Monthly High Income Fund would be a true strategic bond fund which would use the advantages of the closed-ended structure to reach into esoteric and illiquid areas of the fixed-income market. We think only a group with a similar size and reach to Neuberger Berman would be capable of offering such a product, which allows the managers to cherry-pick from a global marketplace of credits and even participate in private loan deals. These can offer highly attractive yields relative to those available in the public markets.

With the rates environment likely to be low for some time to come, we think the flexibility is particularly attractive. Some investors might prefer a more defined dividend target, but we think the planned flexible approach and annual review is sensible. At the same time, tightening spreads could see the managers forced to take more credit risk or more liquidity risk, both of which bring their own dangers.

We also think it worth noting the discount-management plans. A 25% biannual tender offer should reduce discount risk and also, coupled with the intention to wind up if NAV falls below £150m, should reassure investors that they will be able to exit their investment close to NAV in future.

bull bear
Attractive yield potentially on offer, given low-interest-rate environment
Low-growth and low-rate environment means absolute yields could fall in coming months
Deep resources across the fixed-income teams should give advantage in such a broad and flexible mandate
Hedging costs can vary depending on interest-rate differentials
Would offer access to sectors rarely available to the retail market
To generate high yield would need to take credit risk which brings economic sensitivity
Continue to Portfolio

Fund History

06 Apr 2022 Private markets: A closer look at the expanding private debt opportunity
We look at the attractions of the private debt market, historically the hunting ground of the institutional investor…
07 Feb 2022 Fund Analysis
NBMI offers a high monthly yield with less interest rate risk than conventional bonds…
14 Sep 2021 Results analysis: NB Global Monthly Income
NBMI’s results show the benefits of its new strategy, which has been rewarded with a rapidly narrowing discount…
19 May 2021 The complexity premium
We examine the idea that extra returns can be obtained from buying investments which are perceived to be more complex by most investors...
12 May 2021 Riders on the storm
We look at the yields in the alternatives space and how they have been affected by the pandemic…
21 Apr 2021 Results analysis: NB Global Monthly Income Fund
NBMI has reported results for the year ending 31/12/2020, with early evidence of the new strategy leading to improved returns…
21 Apr 2021 Fund Analysis
NBMI offers a high income paid monthly with a potential backstop to the discount…
01 Oct 2020 Alternatives for Income Investors
Slides and audio from our event focused on alternative routes to a reliable income…
09 Sep 2020 Time to switch horses?
We look at what returns are likely from equity markets in the coming decade and identify which alternatives could offer similar or greater returns for lower levels of risk…
24 Aug 2020 Fund Analysis
Board proposals would see NBLS transformed into a high-income, monthly dividend payer…
20 Aug 2020 Alternatives for income investors
In a world where dividend are under unprecedented pressure, our income focused online event in September should provide serious food for thought…
05 Aug 2020 All change
We examine proposals for a monthly income and a far broader remit for NB Global Floating Rate Income fund…
06 Mar 2019 Stairway to heaven
Our research shows that reinvesting the income generated by alternative assets could add a significant boost to long-term portfolio performance…
03 Oct 2018 We can be heroes
Our analysis has uncovered the trusts which have generated a solid income through thick and thin - without compromising other aspects of performance...
15 May 2017 Fund Analysis
An unusual portfolio which invests in 'floating rate' loans, offering an income tied to LIBOR with significant capital protection...
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