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

NB Global Monthly Income Fund (NBMI) offers a high yield (5.5%), paid monthly from a portfolio split between conventional and alternative credit. The flexible mandate was implemented in September 2020 following a shareholder vote which saw the trust change its name from NB Global Floating Rate Income Fund.

NBMI is managed by a team of senior investment professionals at Neuberger Berman, who work on a fixed income desk that runs over $145bn in AUM, including $45bn in sub-investment grade. For NBMI, as well as investing in conventional fixed and floating rate instruments, the team invest in special situations, CLOs and private debt. These areas are only available to specialised institutional investors with deep resources. The illiquidity and complexity of the deals earns a higher yield, as we discuss under dividend.

NBMI’s main source of yield is credit, and as such it has some cyclical exposure. As we discuss in the performance section, the managers are bullish on the outlook for the US economy, in particular, and therefore for credit spreads. While the main economic exposure is to the US, the trust also invests in European debt, but hedges all investments back into sterling. The duration is designed to be kept low, and the high level of exposure to floating rate investments (60%-80% of the portfolio) means the trust offers some protection from rising interest rates.

NBMI has remained on a persistent discount since the transition to a new strategy, and the discount is currently 11.3%. Buybacks have been paused, but the board has committed to a tender offer for up to 20% of the shares each six months from June 2022 and to consider winding up the trust if it falls below £150m net assets.

Analyst's View

NBMI is an attractive source of high income which should, by virtue of its flexible mandate, be able to better maintain a higher yield if conventional credit markets rally. We think it could be an interesting investment to consider for those who want a high yield but who are prepared to accept greater liquidity and complexity risk. Neuberger Berman has a huge team of credit analysts and other resources which we think means it should be able to manage these risks well. Paying a monthly dividend is relatively rare, and could be particularly appealing to those living off their income.

The discount has been persistent since the change of mandate and over-subscribed tender offer. However, for investors with a medium-term view, the 20% tender offers to be held every six months from June 2022, and the commitment to consider winding up the trust if net assets fall below £150m, give strong support on the downside.

US Treasury yields have been rising as its economy reopens and economic activity surges. NBMI’s low duration means this has had relatively little impact on NAV. However, as credit spreads rally – on the good economic news – the trust stands to do well. NBMI would do best in an economic recovery in which credit risks fall and companies outgrow their debt. We note this is the managers’ reading of the current situation and which they believe is conducive to their portfolio’s success. However, the economic sensitivity means the trust would do less well if the economy and markets turned for the worse and would not provide the protective performance of treasuries or investment grade corporates.

BULL BEAR
Highly attractive yield, particularly given low interest rate environment
To generate high yield needs to take credit risk which brings economic sensitivity
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
Discount is wide and has support thanks to regular tender offers and potential for wind-up if tender offers shrink the trust
Short track record under new mandate
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...
View all

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