TwentyFour Income Fund defies wider sector to trade at premium to NAV

TwentyFour Income Fund (TFIF) traded at an average premium to net asset value (NAV) of 1.27 per cent, in contrast to the wider sector trading at a discount, in the six months ended 30 September, as collateralised loan obligations (CLOs) boosted portfolio performance.

The FTSE 250-listed investment company, which predominantly invests in less liquid asset-backed securities (ABS), saw total net assets grow to £867.57m, up from £843.79m for the full financial year ended 31 March 2025.

In its interim results for the six-month period, TFIF reported an NAV return per ordinary share of 5.9 per cent and declared dividends of 4p, in line with the period target of 8p per annum and before payment of the final, balancing dividend at the year end.

TFIF identified CLOs and significant risk transfer as the best-performing sectors in the portfolio in the six months, returning 8 per cent and 6.8 per cent, respectively.

There were allocations to new opportunities in CLO equity and BB-rated tranches during the period, with TFIF citing more attractive risk-adjusted returns.

At the end of the six-month period, TFIF had a portfolio book yield of 12.51 per cent and mark-to-market yield of 10.30 per cent, and said that performance across the portfolio reflected “the strength of both income and mark-to-market gains, with portfolio carry the dominant driver of returns”.

The company has since announced that it held a placing, offer for subscription and open offer of new ordinary shares in October.

TFIF received gross demand of £42.4m in relation to the issue, with all 13,408,436 ordinary shares elected for realisation used to satisfy demand and a further £27.6m raised through the issuance of 24,968,635 new ordinary shares at a subscription price of 110.50p.

“The first half of the financial year has been another successful period for the company, delivering on its investment objective for shareholders, trading at an average 1.27 per cent premium to NAV and issuing £64.3m of shares (year-to-date) in response to strong market demand,” said TFIF’s chair, Bronwyn Curtis OBE.

Since the period end, the company widened its investment universe to consider opportunities outside of Europe in both Australia and the US.

“As both supply and demand have increased in the sector, with European ABS issuance at €119bn year-to-date, our focus remains on allocating to high-quality, higher yielding floating-rate assets – particularly residential mortgage-backed securities and CLOs from established lenders in Western Europe,” said Aza Teeuwen, portfolio manager of TFIF.

“Our preference remains for short-duration assets, providing us with a liquid and flexible portfolio.”

Teeuwen added: “Looking forward, we expect supply to remain healthy for the rest of the year with favourable conditions for European ABS supported by a more stable interest rate environment.”