TIDMAEFS
RNS Number : 9171T
Alcentra European Fltng Rate Inc Fd
11 January 2017
Alcentra European Floating Rate Income Fund Limited
Market Commentary
The Credit Suisse Western European Leveraged Loan Index ("CS
WELLI") (hedged to EUR)([1])
returned +0.63% in December, the sixth successive month of
positive returns. For the full year, the CS WELLI returned
+6.52%.
European loan primary volumes picked up over December, with full
year supply coming in at EUR71.0 billion, 13% up on prior year([2])
. However, a significant proportion of this issuance remains
refinancing
rather than true new supply and so with continued strong demand
for the asset class the secondary market for loans remained strong
over the month.
After a volatile start to the year, 2016 saw strong performance
from risk assets globally, with ongoing accommodative central bank
policy continuing to drive the hunt for yield. This backdrop
resulted in progressively more benign market reactions to some of
the political shocks of the year, with the UK Brexit Referendum, US
Presidential Election and Italian Constitutional Referendum all
seeing surprisingly muted market responses, having been widely
touted as potential catalysts for a return of the volatility seen
earlier in the year.
Global credit markets performed well and a rally in Energy was
behind some of the global performance, particularly in US High
Yield which was up +17.49% for the year, having had a difficult
2015 (-4.64%)([3]) . US loans also benefited from the Energy rally
and returned +10.16%for 2016(3) . In
European loans, the impact of Energy was smaller but
nevertheless felt in the strong CS WELLI performance (which
includes some oil related bank loans). This is the reverse of 2015
trend when the Oil & Gas weakness caused the CS WELLI (+3.14%)
to be quite a bit weaker than most performing loan portfolios
(including this Fund) which typically have little Oil & Gas
exposure.
Defaults stayed relatively low during the period with S&P's
default rate at 2.4% in 2016, versus 2.1%
at the end of 2015[4]. S&P's Distress Ratio (which measures
the percentage of the Index trading
below 80) fell to 3.6% in December. This compares with 3% in
December 2015(3) . This is normally a good indicator of future
defaults. But will also be influenced by secondary loan price
improvements from increased investor demand.
Looking forward we expect to continue to see strong demand for
the asset class over 2017, from a broad range of investors, given
the continued low yields available elsewhere and an increased
appetite for low duration assets as we start to see rate rises. CLO
formations (and CLO repricings) are also expected to continue to
provide further sources of demand for loans.
Given the strong demand for the European loan asset class and
the amount of Private Equity dry powder, we are cautiously
optimistic that new issue volumes will improve in 2017, although
the immediate new issue pipeline looks relatively light and so we
continue to expect repricings and other opportunistic deals in the
near term.
Portfolio Update
Within the Fund, the best performers were a clothing retailer
that was up +14.9%, recovering from recent weakness, as the
business reported both stronger numbers and some progress in
restructuring of the junior debt in the capital structure. Other
top ten performers were a conviction subordinated debt position
which traded up following a partial refinancing in November
(+11.3%) and a range of High Yield and FRN positions which
performed well in line with that market (+1.8 to +3.4%). The bottom
two performers were a global pharma business (-4.7%) following
continued news flow around potential regulatory action in the
sector, and a consulting business which has some exposure to the
Energy sector (-3.6%).
ENDS.
For further information please contact:
Alcentra Limited
Simon Perry +44 20 7367 5272
Factsheet
An accompanying factsheet which includes the information above
as well as wider commentary on the investments made by the Fund can
be found on the Fund's website www.aefrif.com.
Background Information
Alcentra European Floating Rate Income Fund Limited, a Guernsey
Authorised Closed-Ended Collective Investment Scheme, regulated by
the Guernsey Financial Services Commission and listed on the Main
Market of the London Stock Exchange invests predominantly in senior
secured loans and senior secured bonds issued by European
corporates and targets returns (net of fees and expenses) of 7% to
10% per annum. The Fund targets a dividend yield of 5.5 pence per
GBP1.00 issue price of the initial offering of shares in the Fund
for the first full year of investment, paid quarterly.
Important Notices
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
This report is aimed at existing investors in the fund and has
not been approved by any competent regulatory authority.
The information contained in this document is given as at the
date of its publication (unless otherwise marked) and is based on
past performance. Past performance is not a guide to future
performance and the value of investments and investment value can
go down as well as up. The future performance of the Fund will
depend on numerous factors which are subject to uncertainty.
Including changes in market conditions and interest rates and
exchange rates and in response to other economic, political or
financial developments, investment return and principal value of
your investment will fluctuate, so that when your investment is
sold, the amount you receive could be less than what you originally
invested. Past or current yields are not indicative of future
yields.
This document does not contain any representations, does not
constitute or form part of any solicitation of any offer to sell or
invitation to purchase any securities of the Fund, nor shall it or
any part of it or the fact of its distribution form the basis of or
be relied upon in connection with any contract therefor, and does
not constitute a recommendation regarding the securities of the
Fund. Nothing in this document should be construed as a profit or
dividend forecast.
This document includes statements that are, or may be deemed to
be, "forward-looking statements". These forward-looking statements
include, without limitation, statements typically containing words
such as "believes", "considers", "intends", "expects",
"anticipates", "targets", "estimates", "will", "may", or "should"
and words of similar import. The forward-looking statements are
based on the beliefs, assumptions and expectations of future
performance and market development of Alcentra Limited
("Alcentra"), taking into account information currently available
and made as at the date of this document. These can change as a
result of many possible events or factors, not all of which are
known or within Alcentra's control. If a change occurs, the Fund's
business, financial condition, liquidity and results of operations
may vary materially from those expressed in the forward-looking
statements. By their nature, forward-looking statements involve
known and unknown risks and uncertainties. Forward-looking
statements are not guarantees of future performance. Alcentra
qualifies any and all of the forward-looking statements by these
cautionary factors. Please keep this cautionary note in mind while
reading this document.
An investment in the Fund is suitable only for investors who are
capable of evaluating the merits and risks of such an investment
and who have sufficient resources to be able to bear losses (which
may equal the whole amount invested) that may result from such an
investment. An investment in the Fund should constitute part of a
diversified investment portfolio. Accordingly, typical investors in
the Fund are expected to be sophisticated and/or professional
investors who understand the risks involved in investing in the
Fund.
Alcentra gives no undertaking to provide recipients of this
document with access to any additional information, or to update
this document or any additional information, or to correct any
inaccuracies in it which may become apparent including in relation
to any forward-looking statements. The distribution of this
document shall not be deemed to be any form of commitment on the
part of Alcentra to proceed with any transaction.
This document is issued by Alcentra Limited, which is authorised
and regulated in the United Kingdom by the Financial Conduct
Authority and whose registered address is at 10 Gresham Street,
London EC2V 7JD
BNY Mellon is the corporate brand of The Bank of New York Mellon
Corporation and may also be used as a generic term to reference the
Corporation as a whole or its various subsidiaries generally.
(c) 2016 The Bank of New York Mellon Corporation. All rights
reserved. Trademarks and logos belong to their respective
owners.
[1] Credit Suisse Western European Leveraged Loan Index, 30
December 2016
[2] S&P LCD European Playbook, 3 January 2017
[3] S&P Index Data as of 30 December 2016
[4] S&P LCD "(EUR) ELLI default rate rose in 2016", 9
January 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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