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Alcentra plans European Floating Rate Income fund

Floating ratesAlcentra is planning to launch a closed-ended investment company investing in the secured loans and high yield debt of European or North American corporates.

The Alcentra European Floating Rate Income fund will hold at least 80% of its net asset value in senior secured, floating rate debt.

No more than 20% will be held in secured subordinated debt, while unsecured floating rate or secured or unsecured fixed rate high yield bonds will account for no more than 15%.

“Managing uncertainty is the key requirement we are being given,” says Graham Rainbow, the senior loan portfolio manager.

The European loan market, Rainbow says, offers more price stability and discipline compared to that of the US. Europe, he continues, is less affected by volatile retail investor flows of capital and yields tend to be higher.

Rainbow will typically select between 60 and 65 positions for his portfolio. Single industry exposure is capped at 20%, while no more than 20% of issuers will be outside of Western Europe, including the UK.

“Not surprisingly, we are focussed on defensive stocks,” says Rainbow.

His model portfolio shows overweight positions in cable and satellite television, business equipment and services, as well as health care. Meanwhile, his portfolio is underweight construction, retail, hotels and luxury goods.

Alcentra aims to raise in excess of £150 million, (€181.7 million) with the closing date scheduled for February.

“We had a lot of enquiries for this product,” says Simon Perry, the head of business development for Europe, Middle East and Asia excluding Japan. “We have an open-ended fund with monthly liquidity, which a number of investors liked, but they needed daily pricing.”

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