22nd Apr 2016 09:56
LONDON (Alliance News) - Carador Income Fund PLC, which invests in senior notes of collateralised loan obligations, said increased volatility in the credit markets hit its performance in the second half of 2015.
Fears that Greece would leave the eurozone, uncertainty about Chinese equities, fears about when the US Federal Reserve would increase interest rates ahead of doing so in December 2015, and the weakness of the oil and gas sector all played a part in hurting Carador Income Fund in the second half, Chairman Werner Schwanberg said.
Demand for loans fell in the year, the chairman said, as a result of big buyers such as mutual funds and hedge funds stepping back from the market. "Institutional demand was the only source that grew in 2015, which typically focuses on high-quality companies. The institutional inflows were not enough to offset the decline in demand from other investors but were enough to stabilise high-quality loan valuations," Schwanberg said.
Having enjoyed a net asset value total return of 4.58% in the opening six months of the year, the second half meant that over the year as a whole it generated a total NAV return of negative 9.71% including distributions.
The company's shares closed 2015 at USD0.7400, a 2.34% premium to the NAV at the end of 2015. The annualised dividend yield based on the last declared dividends was 13.51%.
Schwanberg said to expect more volatility in 2016. "Softening fundamental and technical trends can translate into attractive investment opportunities, which the company can take advantage of to strengthen its portfolio with CLOs invested in higher spread, higher rated new issue loans as well as secondary loans offered at discounted prices."
"Given this backdrop, the investment manager believes the company's portfolio should comfortably generate net cash flows to cover the target dividend of USD0.0900 per share. The board, along with the investment manager, also believes that the historic target annual dividend of USD0.1000 per share may be achievable subject to a revision of the weighting between mezzanine notes and income notes during the year," Schwanberg said.
By Samuel Agini; [email protected]; @samuelagini
Copyright 2016 Alliance News Limited. All Rights Reserved.
Related Shares:
CIFU.L