Fidante Partners investigates the opportunities BGLF offers for investors seeking exposure to floating rate fixed income investments
- Blackstone/GSO Loan Financing ('BGLF')* is, in our view, an attractive investment for a wide range of investors:
- Income-oriented investors can benefit from a current dividend yield of 11.5%, one of the highest amongst listed structured credit peers and significantly higher than what can be achieved in other yield-oriented investments.
- Investors looking for high quality companies with good management and a relatively high level of security should be aware that BGLF is currently the only UK-listed investment company focused on investments that satisfy European risk retention rules, which substantially reduces the risk of moral hazard.
- Asset allocators can find in BGLF an investment that has low correlation to equities, other alternative investments and UK fixed income investments. Adding BGLF to an existing multi-asset portfolio has the potential to meaningfully reduce portfolio risk while keeping the overall expected return and income from the portfolio at high levels.
We think that the current rating for BGLF shares is too low and should be about six percentage points higher than current levels. Given the current consensus outlook for interest rates, inflation and economic growth, we expect the rating to increase to a premium of more than 6% by mid-2019.
* Current corporate client of Fidante Capital.
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