There were ‘no places to hide’ in debt last year as volatility returned to credit markets after a benign 2017, said Cade. The pace of rising US interest rates under Federal Reserve chairman Jerome Powell (pictured) worried investors and stressed all types of bonds and loans.
‘High yield and investment grade assets were among the weakest performers, whereas senior loans performed relatively well, despite a volatile end to the year,’ said Cade. ‘In 2019, there has been a strong rebound across most debt asset classes,’ he noted.
The most recent change to Numis’ recommendations was the removal of Alcentra European Floating Rate Income (AEFS) in favour of NB Global Floating Rate Income (NBLS), a corporate broking client that Cade said was less exposed to the sell-off in US high yield bonds and whose £634 million size offered more liquidity than the £137 million Alcentra.
Numis also added Blackstone GSO Loan Financing (BGLF) as a ‘trading buy’ due to its ‘wide discount’ of 16%. ‘The share price has been weak over the last year, down c.14% in euro total return,’ said Cade. ‘We believe the discount has the scope to narrow as sentiment to senior loans/collateralised loan obligations improves reflecting a recovery in the market early 2019.’
Funding Circle SME Income (FCIF) was dropped last year following its dividend cut and has fallen further as its performance has been hit by rising defaults.
Numis’ other ‘core’ debt picks are TwentyFour Select Monthly Income (SMIF), a diversified debt fund, and its stable mate TwentyFour Income (TFIF). Both are Numis corporate broking clients.
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