Investment summary

All of Carador Income Fund’s (CIFU) invested assets are backed by secured US corporate credit, a deliberate decision by the manager to avoid European assets over the past 15 months. CIFU’s direct investments are in collateralised loan obligation (CLO) securities, which provide cheaper exposure to the underlying loans, are diversified, and are showing lower price volatility than the direct loan or equity market. US CLO income notes (c 60% of the portfolio) are producing cash income returns of around 40% pa, providing considerable protection against any increase in future loan defaults from a US corporate sector that has spent three years improving profit margins and balance sheet strength. The annualised Q1 dividend yield is c 15%, well covered by cash income.

Last updated on 08/05/2012

Industry outlook

Overall, US corporates are experiencing strong profitability and robust balance sheets, with cash levels the highest since the 1960s. The CLO market has proved the most resilient of the structured debt markets.

Last updated on 29/03/2012