|weekly graph - convincing divergence on long & short osc - gentle medium hi yield play - may consolidate there (issuance?) - then move onto close the gap if navs (@slight premium) rise. Williams%R suggests more to come.|
|Will be interesting to see what the demand for new shares is. I do not know if a target has been set for the fund raise. I do not think TFIF raised as much as had been hoped for on the continuation of the Trust.|
|Davebowler. Thanks for posting.
It is difficult to put a case for buying floating rate MBS securities at the moment and I am not entirely convinced by the arguments put forward above. Yes they are cheap relative to other FI but, as usual, cheap for a reason.
The phrase 'investors will be able to lock into attractive yields with the potential for capital appreciation as spreads tighten' seems a bit rich given the risk of the BOE / ECB lowering interest rates even further. Fair value losses and reduced income streams from further falls in LIBOR will quickly erase any price rises from spread tightening.|
|davebowler, Interesting post. Thanks.|
|TwentyFour Asset Management
The most interesting discussions we have on the desks normally revolve around where we think the best value is, with the different strategies backing their favourite picks and trying to make each other understand the hidden value that the market isn’t appreciating.
Yields, and the corresponding value, are “not door numbers” as Gary is fond of reminding us, and have been driven by sentiment, fundamentals and direct central bank intervention amongst others.
The last of these – central bank action – took an interesting turn yesterday as the Bank of England, on the second day of buying more gilts, failed to buy their target amount in their reverse auction. Another sign of the technical squeeze in £ fixed income that we are experiencing at the moment.
Already since the announcement of the intention to buy £10bn of corporate bonds, spreads on eligible bonds have tightened significantly, and even ineligible bonds – banks and insurers – have seen the “portfolio effect” push prices up and yields down.
Has this value shift happened across the entire market? Definitely not, and a deal last week in the UK RMBS market emphasizes this.
Hawksmoor 2016-1 is a £2.25bn deal backed by vintage (2007) mortgages originated by GE Money. I’m not going to go into the detail of the trade, or our credit view, rather more interesting is the levels the deal priced at and the demand.
Rather unusually there were a couple of tranches issued with split ratings. The Class D bonds are A-/Baa2 and the Class Es are BBB/Ba2. Investors’ interest for these two tranches were between 2 and 5 times the amount of bonds issued, and they priced tighter than initially expected.
Even with that in mind, the yields these bonds were issued at were sterling LIBOR plus 4.75% and 6% respectively.
That’s an incredible yield for 3yr bonds, when compared to the yield on BBB sterling corporate bonds which is currently 1.85% over the same index.
Asset backed securities markets are not as mainstream as corporate bonds and prices do tend to lag, but I challenge any of my colleagues in our other strategies to find something more compelling.
Partner, Portfolio Manager|
|Dividend declaration this evening:
Ex div date: 3.3.16|
|In my IWeb account today - I'll take up my basic entitlement too.|
|Received all docs over the weekend from selftrade...will be taking up my basic entitlement, at least, at 101p.
TFIF hosted a webinar presentation today, which gives a nice update of where they're currently at - well worth a listen:
|So we have a tender (realisation) offer & an open offer. Has anyone had notifications from their brokers yet?|
|Again the share price hasn't moved on ex-div.|
|¢ NAV as at 23 Jan: 118.47 XD (119.97) compared to 118.18 (XD 119.68) as of 16 Jan.
¢ TFIF went ex-dividend very well, with the price not falling post the ex-date, the NAV appears to be ticking up and should provide another strong year of returns for investors.
¢ The fund’s NAV has held up remarkably well during each recent bout of volatility and looks to be well supported by the European ABS QE program along with improving underlying in the Spanish and peripheral SME and housing markets.|
|Thanks DB, all sounds very positive.|
Twenty Four Income Fund (TFIF) Half year to 30 September 2014
¢ NAV total return +6.54%, with two dividends of 2.63pps and 1.5pps respectively paid during the period.
¢ The Board believes the outlook for the company remains robust: “before the end of 2014 it is anticipated that the ECB will begin its ABS Purchase Programme, which will be supportive of prices throughout the European ABS market, and which further enhances the reputation of an asset class that has recently enjoyed material changes in regulatory treatment”.
¢ We wrote two weeks ago about the likely impact of the ECB’s ABS Purchase Programme. Please contact us for the note.
¢ TFIF is the only pure ABS fund in the sector and, like the Board, we believe the fund is well positioned to benefit from the ECB’s actions. We think the Purchase Programme could help TFIF deliver out-sized returns.
¢ The fund is trading at a premium of c.7.3%, and while we are normally hesitant to buy funds at a rich premium, we think this rating is deserved and sustainable because of the strong fundamentals around the asset class.
¢ TFIF is also paying a healthy level of dividend (5.5%) relative to other “vanilla”; fixed income products which, in our view, helps justify the premium rating too.|
Having raised £22.6m on 15 Oct to benefit from opportunities arising from the upcoming ECB purchases of ABS in Europe, the fund has posted a strong weekly NAV (+0.3%), holding up well despite background volatility in the Euro area. According to Bloomberg the ECB purchased €1.7bn / $2.2bn of covered bonds last week, with ABS buying scheduled to begin later this quarter against a pool ofc.€400bn of eligible ABS available to buy from. It is expected that the program will do most of its buying in the secondary market.
¢ Looking through to the underlying geographic exposures there is increasing support in markets such as Spain, where the big US private equity houses/hedge funds such as Blackstone and Cerberus have been active for the past two years seemingly catching the bottom of the market or at least putting in some kind of floor with the weight of money flowing into the area. Most recently Goldman Sachs has been reported to be in talks to acquire €300m of Spanish homes and office buildings in one portfolio of 27 apartment blocks and 11 offices. As of the end of September the total Spanish exposure came to 14.3%, a similar picture can be seen in Portugal (9.7%), where the market is recovering, albeit from a much less distressed base.
¢ Overall we think the fund is well positioned in the market and we will be interested to see how the allocations have changed post the investment of the most recent capital raise. The fund is trading at a premium of c.6.5%, and while we are normally reluctant to buy assets at a rich premium, the fundamentals remain strong and the fund is paying a healthy level of dividend (5.6%) compared to what else we are seeing across the fixed income space.|
Mr Draghi, the ECB president, said this was the final rate cut as it unveiled its latest move to revive lending across the bloc: policy makers will start purchasing bundles of loans, known as asset-backed securities, and covered bonds in October.|
|Agree Wirral. I bought in at the 100p Float Price , so, it's been a 25% return in just over a year in growth and a lovely divi on top. Excellent.|
|Agreed Midas, particularly when you consider this follows hot on the heels of the special dividend paid in April. Bearing in mind the capital growth too, its been a superb investment so far.|
|1st interim dividend declared of 1.5p, payable on 31.07 (Ex-Div 16.07).
20% up on 1st interim last year...now that's what I call real dividend growth!|
|NAV at end May now 119p|
|Net Asset Values
TwentyFour Income Fund 116.76 (XD) 17th April Limited|
|Agree with you M1das Touch, about how impressive TwentyFour's TFIF has performed, and for that reason I also put faith in them with this new vehicle. To be fair, there are fewer fixed income bargains around than there were 12 months ago, so not expecting quite the same capital performance from SMIF as with TFIF, though you never know. However, the monthly income appeals to my own circumstances, and I note in their prospectus that they'll look to boost the final dividend of the year with any surplus profits from the period, which I presume is what we've just seen with the final dividend on TFIF, so it may well be, that even buying in now at around 103.5p, we still end up getting +6%?
Incidentally, I bought 3 chunks the previous couple of days, all in online ISA's with idealing and selftrade with no issues, so good to hear that TwentyFour were even willing to contact and sort out ii on your behalf; very impressive and quite rare these days...|