This closed-end fund is designed to take advantage of the premium returns available from investing in less liquid debt across the full spectrum of the debt markets.

Currently issuing new shares to raise fresh capital, at a reduced premium to net asset value, now is a good time to get exposure.

The portfolio is managed by Gary Kirk and Eoin Walsh of TwentyFour asset management, part of a14-person bond team that manages assets of approximately £12 billion. The assets are well diversified, spread across 140 positions.

The monthly payouts associated with the trust make it a potentially useful product for someone looking to cover regular outgoings and bills.

The trust targets an annual dividend of at least 6p per share (12 payments of 0.5p per share) and a net total return of between 8%-and-10% a year.

Despite the fund’s small size, the trust has an attractive feature whereby it offers investors a tender facility every quarter for up to 20% of the fund at a 2% discount to NAV, subject to one month’s notice.

This has proved an effective mechanism to control the level of discount at which the shares trade. In addition, company has historically issued shares when the trust trades at a premium to net asset value of around 4% and has begun issuing new shares at a reduced premium to net asset value.

Analysis by Numis indicates the managers have demonstrated a disciplined approach to issuing new shares and have only done so when the capital can be deployed to support the yield, which is currently an attractive 7.2%.

This implies the managers have a positive outlook and see the capacity to deploy fresh funds. Numis estimates that historically, returns generated from the start of issuance have averaged 14% over the following year.

The trust has delivered an annualised return of 7.2% and 6.5% respectively over the last three and five years.

The managers actively manage interest rate sensitivity and in November 2021 put in place protection against rising interest rates which has helped performance so far in 2022 as rates have increased.

The portfolio has exposure to floating rate notes, which benefit from rising interest rates. Around a third of the portfolio is invested in subordinated debt, issued by banks to maintain their regulatory capital requirements.

Asset backed securities comprise around 34% of the portfolio and also benefit from rising interest rates. Within the asset backed market, the managers favour CLO (collateralised loan obligation) debt because of the higher yields available compared with equivalent traditional corporate bonds.

The trust has an ongoing investment charge of 1.1% a year.

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