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Fund Profile

NB Global Monthly Income Fund 07 February 2022


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.

NBMI offers a high monthly yield with less interest rate risk than conventional bonds…

This trust has recently announced a proposed managed wind-down of the company and return of capital to shareholders. Please find the full announcement here.

NB Global Monthly Income Fund (LON:NBMI) is essentially a highly sophisticated strategic bond fund that uses the flexibility afforded by the closed-ended structure to invest in various non-conventional fixed income sectors usually restricted to institutions. This helps the portfolio to generate an ungeared yield of over 6%.

NBMI is managed by a team of senior managers at Neuberger Berman who have oversight of the various public and private debt markets via a team of over 50 professionals in the below investment grade space. These resources and Neuberger Berman’s huge footprint in the institutional debt markets allow them to flexibly allocate across the publicly listed bonds and loans market (conventional credit) and into the private debt markets, the CLO market and in distressed debt and special situations (unconventional credit).

The Dividend is set at the start of each year by the board, based on the managers’ view of the opportunities and outlook in their markets. This January the monthly payout has been raised to 0.415p a share, equivalent to a prospective yield of 5.25% on NAV and 5.6% on the share price at the time of writing.

Partly thanks to the high exposure to floating rate instruments, the duration is extremely low at 1.2 years, which could prove an attractive characteristic if the expected hiking cycle is seen this year. The portfolio does have high credit risk though. As we discuss in the Portfolio section, the managers are bullish on the outlook for spreads and report borrowers look in good health from the bottom-up. They view any weakness as a buying opportunity. While the main economic exposure is to the US, the trust also invests in Europe but hedges back into sterling.

Analyst's View

NBMI has some clear advantages over a conventional strategic bond fund. The ability to invest in private debt and other non-conventional markets offers higher yields and greater diversification. As investments in the private markets can offer a higher yield for the same credit rating, there is also the diversification sources of return into illiquidity and complexity as well as simply credit. Considering this alongside the payment of a monthly dividend we believe NBMI has a lot to offer income-seeking investors.

Turning to the short term, NBMI looks like a highly attractive option at this point in the rates cycle, when some of its key advantages look likely to pay off. The extremely low duration should limit the impact of rate hikes over 2022. If the managers are right that the outlook for the US economy remains strong, then the portfolio should also benefit from narrowing credit spreads. Meanwhile, the access to private debt markets should allow the team to continue to fund higher-yielding stock-specific opportunities as spreads on public markets tighten. However, it has to be considered that if the US economy does go through a troubled period, then the credit exposure could see NAV losses.

There are some comprehensive Discount control mechanisms which mean we think the current 6.5% is well protected and could represent a good entry point. The first semi-annual tender offer will be held in June 2022, offering investors a partial exit at NAV less costs, while the board has also committed to consider wind up if these tenders take the trust below £150m in net assets.

bull bear
Highly attractive yield, particularly given low interest rate environment
To generate high yield needs to take credit risk which brings economic sensitivity
Very low duration and high allocation to floating rate investments appealing in rate hiking cycle
Some investments are complex and hard for retail investors to understand
Deep resources in the NB teams allow access to specialised markets offering higher returns
Hedging back into sterling can have a net cost to the fund
Continue to Portfolio

Fund History

16 Nov 2022 Bottom fishing
What can history tell investors about calling the bottom of a market?
19 Oct 2022 Gimme shelter
Our analysts examine safe havens and defensive strategies as we endure the market's 19th Nervous Breakdown...
21 Sep 2022 Results analysis: NB Global Monthly Income Fund
NBMI offers a high yield which has been rising thanks to rising interest rates…
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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