NB Global Floating Rate making hay in QE environment

Corporate loan investment company NB Global Floating Rate Income Fund said the loan markets in the US and Europe continued to perform well in the third quarter, as central bankers kept the bond repurchase schemes going .

In an update on its portfolio, the closed-ended investment company said the most significant changes since the last quarterly fact sheet relate to its more volatile components.

Specifically, the company has chopped its bond positions from 11.6% at the end of the second quarter to 6.7% at the end of September, due to the spread narrowing between loans and bonds, as highlighted in its previous statement.

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The company has also reduced non-US exposure, with European assets' share of the portfolio down from 7.4% to 5.1% over the third quarter. NB Global said this is due do the lack of new supply and the decision to bank some profits.

Looking ahead, the group expects to continue to focus more on the US primary markets (i.e. new issues) for the rest of the year, as the current pipeline of deals is very healthy at just over $35bn. In contrast, the European new issue market is effectively closed for the remainder of the year compounds our view.

NB Global likes the US primary market in any case because it believes US companies remain fundamentally strong, churning out decent earnings.

"Whilst secondary opportunities remain, these are more limited at present given the market rally we have seen, but we continue to monitor the situation and will still continue reducing the more volatile segments of our portfolio and taking profits on some lower yielding assets that we bought at a discount. Although our focus is on the primary market we are well aware that market conditions can change quickly, and cognisant of the fact that if we do see a period of volatility in the run up to year end, that this is likely to present significant secondary buying opportunities," the statement concluded.

JH