TwentyFour Income Fund posts record dividend in “excellent year”
TwentyFour Income Fund (TFIF) has reported a total net asset value (NAV) return per share of 13.6 per cent in its latest annual results, in what was heralded as “another excellent year” for the vehicle.
The fund, which invests in asset-backed securities (ABS) in the UK and Europe, also produced a full-year dividend of a record high of 11.07p, ahead of the 8p target and equating to a 10 per cent yield.
While the NAV return per share was down from the previous year’s 19.4 per cent, Deutsche Numis brokers declared the results “another outstanding year” for the fund, “driven by healthy performance of European ABS as spreads tightened across the year”.
The FTSE 250-listed investment company’s total net assets rose by 3.7 per cent from £813.5m in 2024 to £843.8m.
Read more: TwentyFour Income Fund reports record dividend after bumper year for ABS
TFIF said that European ABS enjoyed a solid performance over the year, thanks to stronger-than-expected macroeconomic conditions, including a resilient labour market and higher-for-longer interest rates.
It also cited strong demand and record issuance for residential mortgage-backed securities (RMBS) and CLOs.
Collateralised loan obligations (CLOs) were the best-performing asset class in the fund’s portfolio over the year, gaining 14.4 per cent and contributing 5.4 per cent to its overall return.
Meanwhile, the performance of RMBS was down to the fund’s exposure to buy-to-let (BTL) mortgages, which gained 29.2 per cent, contributing 4.2 per cent to the portfolio’s overall return.
The portfolio manager, TwentyFour Asset Management, also said that it plans to allocate more to the growing significant risk transfer (SRT) market, to meet investors’ demand for higher-income products.
Read more: CLOs boost TwentyFour Select Monthly Income Fund’s H1 performance
Portfolio manager Aza Teeuwen said he expects the record issuance and demand for European ABS and CLOs to continue as investors seek higher income.
“We continue to favour senior secured assets and prime borrowers in case of economic slowdown, but we hold a positive view on European and UK fundamentals and believe that consumers and corporates are well-positioned overall,” he added.
“As banks increase their use of ABS and RMBS, we have been able to diversify and improve the quality of borrowers that the company has exposure to, without sacrificing income.
“The CLO pipeline should create attractive investment opportunities into the summer, particularly as CLOs are increasingly refinanced early. We are optimistic for the growth of the securitisation market in Europe in the coming years, as proposed changes to capital charges could help to encourage new participants.”
Read more: First-time CLO managers preparing to enter European market
Deutsche Numis analysts also noted that TFIF is one of the few investment companies to trade on a premium to NAV, which has facilitated around £15m of issuance in recent months, despite the headwinds faced by the wider sector.
