Reflecting sustained strong demand for its strategy, CQS New City High Yield Fund (NCYF) has traded at an average premium to net asset value of 4.9% over the last five years. Whilst the discount to net asset value spiked out in the depths of last year’s market trough, it quickly bounced back and NCYF was until very recently trading at premiums in excess of 5%. However, it has drifted out to trade around par since February’s modest steepening of the yield curve (where the yield curve steepens, longer term interest rates rise relative to shorter-term interest rates). Overall, this steepening should be positive for the bulk of NCYF’s financials holdings, which make up around 50% of its portfolio. In addition, with an improving outlook for 2021 as COVID-restrictions are eased, there is scope for recovery in some of NCYF’s other holdings. We think the current lower-than-average rating of the fund may prove to be short-lived and may offer an opportunity.
15 Apr 2021
A short-term opportunity?
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A short-term opportunity?
CQS New City High Yield Fund Ltd GBP (NCYF:LON) | 51.8 0 0.0% | Mkt Cap: 278.1m
- Published:
15 Apr 2021 -
Author:
James Carthew | Matthew Read | Shonil Chande -
Pages:
29
Reflecting sustained strong demand for its strategy, CQS New City High Yield Fund (NCYF) has traded at an average premium to net asset value of 4.9% over the last five years. Whilst the discount to net asset value spiked out in the depths of last year’s market trough, it quickly bounced back and NCYF was until very recently trading at premiums in excess of 5%. However, it has drifted out to trade around par since February’s modest steepening of the yield curve (where the yield curve steepens, longer term interest rates rise relative to shorter-term interest rates). Overall, this steepening should be positive for the bulk of NCYF’s financials holdings, which make up around 50% of its portfolio. In addition, with an improving outlook for 2021 as COVID-restrictions are eased, there is scope for recovery in some of NCYF’s other holdings. We think the current lower-than-average rating of the fund may prove to be short-lived and may offer an opportunity.