|Analyst comment on Sept 16 NAV:
N+1 Singer, 20 October 2016, "Seventh consecutive month of NAV gains +19.2% since February"
NAV performance was up 1.6% in September to 74.66c, the seventh consecutive month of positive returns delivering a +19.2% return since the end of February. The share price has risen 24.1% over the same period and the discount has narrowed from 5.4% to 1.6%. Q3 dividend of 2.25c declared, payable 2 November, ex 27 October.
Fidante Capital, 20 October 2016, "CIFU - Carador Income - September 2016 NAV and dividend”
The NAV as at 30 September 2016 was $0.7466 per share, up $0.0119 per share (1.62%) in September and up 14.24% year-to-date (total return). The company received net cashflows of $20.2m (or $0.0371 per share) in Q3 2016 (Q2 2016: $17.7m). The weighted average annualised cash on cash payments for the income notes during Q3 2016 was 31.72% based on the latest valuations. Of the cashflows received on the income notes during Q3 2016, 26.38% was allocated to principal (Q2 2016: 31.86%).
Liberum Capital, 20 October 2015, "Positive performance in September”
The CLO issuance grew this quarter and could potentially pick up before the risk retention requirement starts to apply at the end of December. The high yield and loan markets continue to advance and should allow CLO funds to maintain their positive performance. Volta is trading at a 10% discount approximately to its September NAV and Carador at 2.9%. The average for the sector is 2.8%, with Fair Oaks trading at a 2.3% premium.|
|Cheers for posting that.|
Positive performance in September
Volta's NAV per share as at 30 September 2016 was €8.2 including the dividend of €0.15 paid in the month. The September NAV is higher by 1.4% compared to the August NAV mainly due to positive performance in most credit and equity markets.
In September, Volta sold four positions (two USD CLO debt and two European CLO debt) with expected yields close to 4.5%; no purchases were made. The company generated cash of €1.0m in interest and coupons during the month bringing the total cash holdings to €8.0m. The mark-to-market variations in September were +1.2% for Synthetic Corporate Credit deals, +1.8% for CLO Equity tranches, +1.7% for CLO Debt tranches, +1.8% for Cash Corporate Credit deals, and, +0.7% for ABS.
Carador Income Fund
Carador's NAV per share as at 30 September 2016 was $0.7466 a 1.6% increase to August NAV per share. In the quarter, the company received estimated net cash flows of $20m or 0.0371 per share increased by 14% compared to Q2 2016.
Carador traded $101m in nominal value during the month of September and the weighted average risk-adjusted IRR for all investments is approximately 14.1%. The company also sold three tranches of 1.0 BBs and three tranches of 2.0 Income Notes at a weighted average risk-adjusted IRR of approximately 10.38%. As at September 2016, the portfolio comprised 73.93% of NAV in Income Notes and 26% of Mezzanine Notes.
The Q3 2016 dividend of $0.0225 per share will be paid on 2 November 2016.
The CLO issuance grew this quarter and could potentially pick up before the risk retention requirement starts to apply at the end of December. The high yield and loan markets continue to advance and should allow CLO funds to maintain their positive performance. Volta is trading at a 10% discount approximately to its September NAV and Carador at 2.9%. The average for the sector is 2.8%, with Fair Oaks trading at a 2.3% premium.
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|Sept 16 NAV = $0.7466 (+1.62%). Monthly Perf. = +1.62%. YTD = +14.48%.
$2.25c div paid 2 Nov 2016. Ex-Div 27 Oct 2016.|
|The cable rate is irrelevant if these are bought on margin at 1.9% as I do through Interactive Brokers.|
|In many ways tou are right Pejaten and it will be important to see how many of their 54 Senators the republicans loose for them not to have a senate majority but a Trump victory will still-IMO- move the markets in which direction I am not sure.|
|How much power does a President have though. He needs to have the Houses on his side to get anything done.|
|As a CIFU holdert, thanks for posting that dendia
I have been thinking of increasing my holding but will be doing no buying of this-or FAIR- pending the US election.
Like everyone else I have no idea what would happen with a Trump win and I have seen cogent arguments saying the $ will increase and others that it will fall.
While I cannot workout how someone who has alienated minorities, hispanics and women can win he seems to have momentum.
The market has yet to focus on this and I am expecting some turbulence in the coming weeks which will wash over into the FTSE 100.
Fair and Cifu are in the front line in two aspects-the cable rate and also what could happen in the US credit markets-especially in the markets that CIFU/Fair operate.
I am not selling and of course a Trump victory only a 35%(??) probability but for me a time to sit on the sidelines.|
|Analyst comment on Aug 16 NAV:
Fidante Capital, 21 September 2016, “Carador Income – August 2016 NAV”
2016 has been a volatile one for US CLO investors, though August was another strong month, particularly for investments in lower quality (CCC) paper. Carador's 3.0% return this month brings year-to-date returns to 12.4%, slightly below that of Fair Oaks (up 2.3% in August, and up 15.5% year-to-date). Volta Finance (which invests in US CLOs, European CLOs and other ABS) is lagging the peer group, up 4.9% (NAV total return) year-to-date to 31 July 2016, and is the least liquid of the three companies. Carador's share price opened today at $0.73, marginally lower than its 31 August 2016 NAV, and offers investors an attractive income yield of 12.2%.
Liberum Capital, 21 September 2016, "Post-Brexit rally continues”
The CLO sector is one of the most attractive on a relative basis in our alternatives universe. There is potential for further yield compression in the short-to-medium term and the underlying cash return from CLOs has been strong given that defaults remain low. Carador is now trading at par, with BGLF at a small discount of -0.8%. The CLO funds peer groups now trades on an average discount to NAV of -2.4%, which has tightened in from -3.7% over the month, reflecting the attractiveness of the sector, which offers a 9.5% prospective dividend yield.|
|Aug 16 NAV = $0.7347(+2.99%). Monthly Perf. = +2.99%. YTD = +12.65%.|
|Went through the interims.
Good to see the net cash flow cover for dividends in the first half back up to 1.5x compared to 1.3x in H1 15.
Company say prices will be helped as supply of new loans less than demand-in both US$ and Euros. H1 16 issuance in US$ was US$210b and in Euros was E30b.
At June 30, 0.27% of assets in default-for FAIR where the cumulative defaults are 0.09%.
Investment Managers in their outlook statement refer to rotating into longer dated CLO income note positions-not sure how that relates to their comments in their latest monthly report of derisking the portfolio.
The fact that in H1 the NAV return including dividends was 2.68% meant there was no performance fee payable-last year’s was US$1.1m.
As at June 30 a 1% increase in interest rates would have a negative impact on net assets of $5m-net assets were $375m;at June 30 2015 the negative impact on net assets was $13m of a 1% increase. Anyone understand why in the last 12 months the portfolio is less vulnerable to an increase in interest rates??|
|I was interested to read their comment that they will be disciplined in pursuing opportunities and will use market conditions to de-risk as it seeks value...given that, no surprise that cash balances have increased to 8.9%-high in the context of the last year.
This de risking policy may be tied into fact that JPM continue to see defaults-ex commodities-at 2% for full 2016 compared with YTD ex commodities of 0.89% ie I read this as saying JPM expects defaults to increase in the remainder of the year.
I see CIFU has 2.4% in O&G and nothing in metals/mining.
I continue to wish that CIFU would follow Fair's example and tell us about defaults in their own portfolio.
I see no reason to buy or sell at these prices|
|Analyst comment on Jul 16 NAV:
N+1 Singer, 22 August 2016, "July NAV up 3.3%, fifth consecutive month of NAV gains"
NAV performance was up 3.3% in July to 71.34c, the fifth consecutive month of positive returns delivering a +13.2% return since the end of February. The YTD total return is 9.4%, the shares are currently trading at par having been on a discount of 6.6% at the end of July.
Fidante Capital, 22 August 2016, "CIFU - Carador Income - July 2016 NAV"
The NAV as at 31 July 2016 was $0.7134 per share, up 6.53% in July and up 9.16% year-to-date. The company received net cashflows of $17.8m (or $0.0328 per share) in July (April 2016: $15.3m). The weighted average annualised cash on cash payments for the income notes during July were 35.44% based on the latest valuations. Of the cashflows received on the income notes during the month, 27.43% was allocated to principal (April 2016: 33.36%).
Liberum Capital, 22 August 2016, "Strong July for CLO funds"
We regard the CLO sector as one of the most attractive on a relative basis in our alternatives universe. There is potential for further yield compression in the short-to-medium term and the underlying cash return from CLOs has been strong as defaults remain below historic levels. This is the ultimate driver of returns as CLOs benefit from a term leverage structure. The CLO funds trade on an average 3.7% discount to NAV and offer a 9.7% prospective dividend yield.|
|N1 Singer update on research tree: "NAV performance was up 3.3% in July to 71.34c, the fifth consecutive month of positive returns delivering a +13.2% return since the end of February. The YTD total return is 9.4%, the shares are currently trading at par having been on a discount of 6.6% at the end of July."|
|fifth consecutive month of NAV gains|
|Jul 16 NAV = $0.7134 (+3.27%). Monthly Perf. = +6.53%. YTD = +9.39%.|
|Yieldsearch a few questions - Carador mentions in annual report that it strategy is to minimise exposure to clo's that invest in unsecured debt. You mention that Carador invests in unsecured debt. Do you mean the more risky equity portion of clo or are u referring to the underlying debt?- Carador also mention in annual report that they deduct any fees paid on underlying investment, but you mention the potential to double dip. Did I read the annual report incorrectly?- cannot remember about CIFU but fair recently referred to liber floors and that they will benefit because original assumption they used was that floors would be breached earlier than now looks like the case?|
Rising benchmark raises borrowing costs for companies
Higher three-month dollar Libor also affects vast universe of collateralised loan obligations
Interesting article highlighting that CLO have benefited from libor floor on loans and with interest rate increase in the US, the benefit of this libor floor is reducing.
My understanding below, however may be completely wrong: CLO are libor based vehicle, asset (loans) are paying libor and a spread, and the clo notes are all libor based except the most junior piece, the equity, taking all excess cash
It seems that the loans have libor floor (at 1%), therefore when the libor rate were lower than 1pc, the assets were paying 1pc but the liabilities (clo notes) were using a lower libor, hence creating more excess cash for the most junior tranche, the equity. With the gearing in place, this may be material. With USD libor increasing it seems that this extra cash will potentially not available anymore.
Not sure what is/will be the impact on clo funds like Vta, Cifu, Fair, fair to say that it is most likely negative. Really based on their exposure to clo equity piece, and if this increasing interest rate environment was priced in the valuation of those assets.|
|Invested in volta finance, quoted in eur, not in cifu.I am more comfortable with axa than blackstone as asset manager, but that really my view...I believe cifu has been more volatile than vta, i guess because of difference in positionning/allocation. Also from memory cifu manager has increase the cap on clo asset with blackstone as clo manager, which i think is bizarre as you have potentially conflict of interest here (blacktone clipping a fee on the clo and then also on cifu..nice for them no??)Good dvd on both, but really these will tank as soon as credit market are worsening. The structure used here for clo is not that different than the one used for us subprime mortgage, hence it us critical that the asset manager has a good view on industries like oil etc...So view those are credit cyclical.You may want to look at FAIR also, smaller manager and less diversified, but likely more open to questions from investors.Finally if you are looking for yield, the best one on a risk/ return adjusted basis is RECP. Lower yield than above cifu or vta but this is a senior debt on secured loans (cifu and volta are leverage play on unsecured loans)|
|Thanks yieldsearch, that makes sense. So they are not buying the bonds per se, they are buying CLOs, hence the higher yield.|
|Thanks for that Yieldsearch. Are you an investor.....?|
|CIFU invests in CLOs. A key factor is default rate - this is still historically very low and due to creep up but CIFU exposure to oil/energy is only around 3%.|
|Rct: cifu invest in equity and junior pieces of CLO.Clo are collateralised loan obligations: i would give an example. Take one asset manager, building a portfolio of corporate loans, mostly low investment grade or non investment grade. He is issuing debt secured by this loan portfolio (clo debt) that debt is tranched into multiple tranches, with each different ratings and priority of payment ( senior repaid first, and usually rated AAA). There is a large market of clo issuance, asset manager, and corporate loans. Cifu (like volta) would typically buy the most junior tranche called equity or the subordinayed tranches. Thoses are high yielding because are structurally subordinated.So all in all think of cifu as a portfolio of leveraged positions on corporate/leveraged/high yield loans. Due to the embedded leverage of the clo, if the market price of the underlying loans is down, the nav value of the equity piece will be down much more, due to the leverage. Market was nervous with the exposure to oil industry. Dont think cifu is invested in distressed assets|
|Thanks digger, appreciate you taking the time.|