CQS New City High Yield Fund Ltd (NCYF) ; what's the catch ?

Heedtheadvice

I have held since 2011. Only held for the income really.

For the sake of simplicity/brevity and an approx bag of fag packet calc so this is a very simple overview and probably incorrect; figures as follows:

Bought at 60p, several periods of volatility now closer to 50p so currently about 14% loss in book value. Taking in to account inflation over the period ( as said above) quite a loss in real terms. Inflation taken into account consider maybe a 60% loss.

Dividend only slowly increasing annually; divi averging something like 7% so maybe  worth140% of original capital over a 20 year investment period.

At a premium to buy. 

Low dividend cover.

Diversity of underlying  bonds done for you

Overall a positive gain?

Happy to hold in a retirement portfolio as long as I have other investments to diversify including funds that have a better overall gain with decent income  or much better gains too. 

Has been better to date than buying an annuity ( still have some of that capital value) but would reconsider if the aim was  mainly capital appreciation unless divi reinvested.

( await this to be torn apart!)

Altior

All views welcome

In my research I like to see how a holding performs through at least one downturn (ideally multiple).

Covid killed the capital value of the asset. Over the 5+ years since covid, the capital value has appreciated, as well as the trust providing the income. 

Definitely the time to use some big chips looks to be after a correction/crash. 

Hoenir

masonic said:

It can trade at a substantial discount when under stress. I last bought it in the pits of the Covid crash. Not one for the faint hearted when the next crisis comes around.

Perfectly fine if one understands the mechanics and forms part of a diversified portfolio.  Health warnings apply to all investments. Reward comes from taking a calculated risk. 

Altior

I'd argue that they aren't comparable (though obviously both yielding relatively high). The risk of a total loss or game changing event is more significant with a single business (albeit a large one). 

Hoenir

TheTelltaleChart said:

A bit too obscure for my taste. Legal & General (LGEN) yields over 8%, and the dividends go up at a decent rate (though the share price doesn't, recently!). I'd prefer a solid (touch wood!) large business to something depending on the talents of one manager.

There's normally teams involved. Succession being planned continually. 

artyboy

Hoenir said:

TheTelltaleChart said:

A bit too obscure for my taste. Legal & General (LGEN) yields over 8%, and the dividends go up at a decent rate (though the share price doesn't, recently!). I'd prefer a solid (touch wood!) large business to something depending on the talents of one manager.

There's normally teams involved. Succession being planned continually. 

Who was Neil Woodford's successor?

Hoenir

artyboy said:

Hoenir said:

TheTelltaleChart said:

A bit too obscure for my taste. Legal & General (LGEN) yields over 8%, and the dividends go up at a decent rate (though the share price doesn't, recently!). I'd prefer a solid (touch wood!) large business to something depending on the talents of one manager.

There's normally teams involved. Succession being planned continually. 

Who was Neil Woodford's successor?

At Perpetual... that was some time ago. He went on to manage funds in his own right that I do recall. 

Hoenir

TheTelltaleChart said:

My issue is not only with the number of key managers, but also with their talent, which may suddenly disappear, when investment conditions change to something that doesn't suit their approach.

The investment universe is so large. Impossible to become a successfull jack of all trades. People specialise. Stick to what you know well. As eventually cyclical forces will bring a prticular sector into the limelight. Charles Montanaro with UK and European smaller companies , Charles Jillings in Emerging Markets, Jean Roche in UK mid caps. Knowledge is built from spending hours and hours researching. 

Altior

TheTelltaleChart said:

Altior said:

I'd argue that they aren't comparable (though obviously both yielding relatively high). The risk of a total loss or game changing event is more significant with a single business (albeit a large one). 

Your point about a single business having more concentrated risk has some validity. However, L&G's future prospects depend mainly a few broad themes in retirement provision and asset management, which seem fairly persistent to me. NCYF depends on the yields in the high-yield bond market, or the part of it the manager selects, being high enough to overcome losses from defaults. And defaults are likely to cluster heavily, i.e. there will probably be a lot of them together in an economic or financial crisis, leading to permanent loss of capital.

If you're happy to spend some of the real value of your capital, why not just spend some of it? Instead of pushing for higher yields, so you can tell yourself you're only spending the income, and as result ending up in more obscure investments with higher risks.

Hoenir said:

There's normally teams involved. Succession being planned continually. 

My issue is not only with the number of key managers, but also with their talent, which may suddenly disappear, when investment conditions change to something that doesn't suit their approach.

I'm not arguing for or against L&G, I just don't see it as an analogous investment to NCYF (investment trust).

Most people would usually prefer to get capital growth from an investment than not, however NCYF is in my portfolio for the income/yield primarily, capital gains would be a bonus.  

Defaults are an ongoing wealth warning when it comes to the high yielding corporate bond space. Theoretically at least, I'm paying people to mitigate the risk and identify the best opportunities over the long haul. Certainly not a task I'd have an appetite for performing myself. 
 

Altior

I personally don't feel like picking out a currently high yielding single stock is too relevant in this topic. I suppose one could equally start a new topic about LGEN yielding upwards of 8%, and asking what's the catch. But really what I was looking for was any intel on this particular trust that might have been passing me by in my research (rather than looking for an alternative option). Nothing put forward has quite dissuaded me as yet....