IC Top 100 Funds NB Global Floating Rate Income (NBLS) traded at a premium to its underlying net asset value of 5-6 per cent for most of 2013. But since the start of 2014, this premium has fallen to 1.73 per cent. While the company posted a strong run of returns in 2012 and 2013 its performance prospects for 2014 look vulnerable and it may be time to reduce your exposure.
NB Global Floating Rate Income launched in April 2011 and targets income generation, while seeking to preserve investors' capital and give protection against rising interest rates. It aims to provide shareholders with regular dividends, at levels that are sustainable, while growing the capital value of its investment portfolio over the long term by mainly investing in floating rate senior secured loans.
Senior loans are floating-rate instruments and therefore provide a level of protection in a rising interest rate environment that may not be available from bonds with a fixed coupon. Senior loans allow investors to potentially attain relatively high rates of income. Loans are usually secured by a security package over a substantial proportion of the borrower's assets, often rank first in terms of the priority of payment, and are therefore senior to bonds in a company's capital structure. That means they are less sensitive to changes in credit fundamentals and can offer a greater level of capital and income security.