Fixed Income  

TwentyFour Income trust doubles in value to £300m

TwentyFour Asset Management’s Income investment trust has almost hit the £300m mark less than nine months after launching with £150m from initial backers.

The trust, which released its first biannual report last week, has nearly doubled in size, according to the Association of Investment Companies, which values its assets at £294m.

The report said the trust’s size rose to £216.8m a few months after launch as it issued more shares following investor demand. It raised a further £55m in October.

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TwentyFour is known for its focus on less conventional areas of the bond markets, including asset-backed securities (ABS) and secured loans, although its Dynamic Bond fund invests in high-yield, investment-grade and government bonds.

The trust’s board said it had delivered 7.3 per cent in the six months to September 30, including dividends. Its shares traded at an average premium of 5.1 per cent above the net value of its assets.

Rob Ford, who runs the trust with Ben Hayward, Aza Teeuwen and Douglas Charleston, said its portfolio is “heavily skewed” towards the UK, the Netherlands and Spain, with smaller exposures to Portugal, Italy, France and Germany.

“This is indicative of the component parts of the European ABS market, but also the belief of the portfolio management team that, while the securities are cheap, there will be a range of drivers of spread reversion and price performance, and that having a diversified portfolio will enable the company to benefit from the full range of upside.”

Mr Ford said the trust is heavily exposed to the residential mortgage-backed securities market, which he said is the largest sector of the European ABS space.

The manager added that the trust has “significant exposure” to collateralised loan obligations, where payments from business loans are packaged as an investment.

Mr Ford said the trust’s exposure to this area is “beyond that anticipated at launch” and has been driven by a revival of issuance in the space.

In terms of performance, the manager said the only period since launch that had challenged the trust was during June when yields rose, meaning prices of fixed income instruments fell, causing losses in bond funds.

Mr Ford said this was driven by several things, most notably the Federal Reserve’s announcement in May that it would consider reducing its monthly bond-buying as part of its quantitative easing programme aimed at supporting the economy.

“The uncertainty in the markets following this announcement pushed prices in most of the fixed income markets down, and as this coincided with the half-year end for banks – when their appetite is generally to reduce risk, and with significant amounts of bonds coming onto the market as public auction activity picked up – the company’s net asset value dropped as credit spreads widened,” Mr Ford said.