Connect with us

News

Henderson Diversified Income outlines new investment objective and policy

Published

on

Henderson Diversified Income outlines new investment objective and policy – Henderson Diversified Income (HDIV) has released its full year results for the year to 30 April 2021, which includes details on its proposed new investment objective and policy, initiated by the regulatory requirement to transition away from LIBOR to alternative reference rates by the end of 2021. The new proposals are subject to shareholder approval at the upcoming AGM in September.

Although not part of the investment objective and policy, the board is also proposing to change HDIV’s benchmark, effective from the date shareholders approve the new investment objective and policy. The replacement benchmark (which is hedged back to sterling) will be as follows: 

  • 60% Global High Yield Credit (ICE Bank of America Global High Yield Constrained Index)
  • 25% Global Investment Grade Corporate Credit (ICE Bank of America Global BBB Corporate Bond Index)
  • 15% European Loans (Credit Suisse Western European Leveraged Loan Index)

Investment objective

The current investment objective is to “seek income and capital growth such that the total return on the net asset value of the company exceeds the average return on a rolling annual basis of three month sterling LIBOR + 2%”. The board proposes to change this to “seek a sustainable level of annual income and capital  gains consistent with seeking to reduce the risk of capital losses, by investing in a diversified portfolio of global fixed income and floating rate asset classes”.

The board has also put into place assurances that investments, activities and the activities of service providers are consistent with wider social responsibilities which it believes are a growing priority for stakeholders. It said ESG issues can present both opportunities and threats to long-term investment performance and that constructive engagement with management can be the most effective way of driving meaningful positive change in the behaviour of investee company management. However, as HDIV is largely invested in debt securities, engagement may be lighter touch than in an equity company and so the board is continuing to examine the benefits and risks of including a more explicit ESG objective for the investment portfolio.

Investment policy

The current investment policy aims to deliver its objective by investing in a diversified portfolio of global fixed and floating rate income asset classes including secured loans, government bonds, high yield (sub-investment grade) corporate bonds, unrated corporate bonds, investment grade corporate bonds and asset backed securities. The company may also invest in high yielding equities and derivatives, using a dynamic approach to portfolio allocation across asset classes and is permitted to invest in a single asset class if required. The company seeks a sensible spread of risk at all times and can invest in assets of any size, sector, currency or issued from any country.

The board proposes to deliver its new objective using a dynamic approach to portfolio allocation across asset classes and the managers are permitted to invest in a single asset class if required. The company seeks a sensible spread of risk at all times and can invest in assets of any size, sector, currency or issued from any country.

Results

Meanwhile, HDIV enjoyed a good year of performance with a NAV total return of 13.5% and share price return of 10.7%, both ahead of its current benchmark return of 2.2%. This is however slightly behind the new proposed benchmark, which is up 15.5% during the period under review.

A third interim dividend of 1.10p per share was paid on 31 March 2021 and a fourth interim dividend of 1.10p per share was paid on 30 June 2021 making a total of 4.40p per share for the year, in line with expectations.

Extract from the managers’ report:

Macro Background

In many ways the period under review was fairly easy to navigate. The global COVID fiscal and monetary stimulus continued supporting markets fantastically well. The period was entirely about credit repair, recovery and reflation. The war on COVID led to extraordinary support which was hugely beneficial to the corporate bonds we hold in this Company. In fact, given that COVID was not anybody’s fault it is arguably unlikely we will ever see such widespread support for corporate bonds ever again. In early April 2020 (before the start of this financial year), the Fed crossed the Rubicon and announced they would start buying corporate bonds and ETFs. This was the ultimate signal to “not fight the Fed.”

In reality they only bought a tiny $14bn of corporate bonds as market participants, knowing they had an explicit backstop support, wanted to front run them. Unlike previous crises we have endured this essentially meant that the investment grade and high yield markets were open for business – open at a price, but open.

Many large investment grade businesses tapped the markets for precautionary reasons to bullet proof their balance sheets. 2020 was a period of record issuance and record spread levels and volatility. US investment grade spreads peaked at a scary 4% over Treasury yields in late March 2020 and rallied with frightening speed to only 0.9% – reassuringly expensive, again at 30 April 2021. The snap back in spreads was the fastest on record and was further compounded in the Autumn of 2020 by the exceptionally positive vaccine news and then the market friendly US election result. As mentioned last year we increased gearing where possible to lock in some of these scarily wide corporate bond yields. As the markets matured we then saw more desperate high yield issuers tap the markets – Carnival Cruises has in some ways become the poster child in this crisis for rescue bridging finance – indeed they have raised loans, secured bonds, unsecured bonds, convertible and ordinary equity many times in the last year. Other distressed issues followed suit in names such as AMC Cinemas and Six Flags.

The EU and UK Government’s demonstrated extraordinary levels of state support to vital sectors such as autos, airlines, travel companies etc. These businesses were considered too big to fail. There was of course unprecedented support to employees on furlough type schemes. Governments were desperate to avoid a depression and by using enormous transfer payments they kept money moving around the economy. Life was of course much tougher for smaller businesses who do not have access to financing so easily. Unlike “normal” recessions we have not seen a dramatic fall in incomes nor a rise in unemployment. In addition, we have seen significant demand for physical goods for the home offset by the collapse in demand for services. The COVID crisis has widened inequality between large cap and small businesses but also between wealthy and employed and those less fortunate. The wealthy and retired have been forced savers whilst low income groups have had to borrow to survive. US high yield default rates have been surprisingly low – they peaked around 5.9% in May; with many of the problems in highly cyclical and highly levered sectors such as energy and retail. Projected defaults, per Credit Suisse for the next 12 months are a paltry 2.5%.

Asset Allocation and Stock Selection

We tend to run approximately 20-25% gearing as a neutral level being a combination of financial gearing (borrowing money and investing at a better yield than the cost of the debt) and synthetic gearing (the use of credit derivatives). As discussed in last year’s review we increased this into the eye of the storm in March/April 2020. We were able to add risk profitably whilst many others were forced to reduce gearing, a benefit of our closed-end structure. The gearing has been run at above average levels for much of the period but was reduced into the summer period as valuations returned to more normal levels. In addition, over the period we broadly rotated our better quality investment grade bonds into shorter duration, but higher yielding, high yield bonds as the recovery progressed.

New high yield bonds were bought in both the primary and secondary markets. In keeping with our sensible income philosophy, we favoured larger, less cyclical modern day facing businesses which have a reason to exist in the post COVID era. Some examples include Virgin Media, Davita, Rackspace Technology, Sirius, Broadcom, Avantor, Black Knight, Crowdstrike & Expedia. A lot of these names tend to be American based global technology companies specialising in the modern economy in areas such as media/cable tv, cloud infrastructure, cyber security and payment processing. These businesses are of significant size and proven for the digital age. We feel shareholders are much better served by our holding the bonds of such companies rather than scrapping around in the much smaller and illiquid, old world analogue UK based high yield market.

There are, of course, obvious exceptions, but as a rule we continue to be attracted to the size, depth, breadth and diversity of the US corporate bond markets. Having said that, certain European financials also offer good value. We added some junior banking and insurance bonds to enhance the yield of the portfolio in names such as RBS, Lloyds, Aviva, Direct Line Insurance, ING, Rabobank and Barclays. The banks have had a remarkably good crisis – they went into this period with record levels of capital; they over-provisioned early in the crisis, making prudent use of the more flexible accounting rules. In addition, they have greatly benefitted from the direct and indirect Government support schemes aimed at the UK housing markets and company support schemes. Finally, we have added a little to our loan holdings – although the all in yield is not overly attractive, they do add some diversification and low beta carry to the portfolio.

Outlook

Volatility and measures of distress in credit markets are at 15 year lows. Credit markets are priced tight but arguably fairly given the remarkably benign outlook. In this market it is more important than ever that we keep focused on sensible income and not get drawn to illusory “fools yield” bonds where the yield is so high you are almost guaranteed to lose capital. We are very mindful of value traps, illiquid, esoteric and exotic credits. The COVID crisis accelerated many of the existing structural themes we have spoken about in previous reports and if anything, in the longer term we see a more deflationary world. We completely understand the markets obsession with inflation but feel it is predominately a cyclical and transitory phenomenon. The modest rise in bond yields may well give us an opportunity to lock in higher yields for shareholders and, reassuringly, in the current environment we feel the annual dividend remains secure.

HDIV : Henderson Diversified Income outlines new investment objective and policy

previous story | next story



Source link

Continue Reading

News

Are Sallie Mae Student Loans Federal or Private?

Published

on

When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

Learn more:

Source link

Continue Reading

News

Tips to do some fall cleaning on your finances

Published

on

Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

Source link

Continue Reading

News

How to Get a Loan Even with Bad Credit

Published

on

Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

Source link

Continue Reading

Trending