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

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. 
 

TheTelltaleChart

Well, any 2 investments you can buy on a platform are analogous, in the sense that you could choose to buy one instead of the other …

Investment trusts are of course generally more diversified than single businesses. However, some are in pretty niche areas. Do you need an allocation to high-yield bonds at all? (And if so, trackers do exist for this area, so does an active manager add value exceeding their higher costs? I'm certainly not suggesting DIY selection of high-yield bonds.)

I'm not a great believer in investing for income as a strategy. It's nice when natural income comes in covering expenditure. But if it doesn't match exactly, one can also add or subtract some cash from a savings account. And perhaps adjust one's level of cash to a target at the next rebalance.

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....

Hoenir

Altior said:

Nothing put forward has quite dissuaded me as yet....

The only way to learn is to try. Make mistakes but don't repeat them again.