TWENTY FOUR INCOME FUND: Aiming to generate strong returns through asset-backed securities
What is it?
The fund aims to generate a strong return – but rather than investing directly in firms, it buys packages of loans called asset-backed securities from lenders like banks.
It then rakes in the interest the borrowers pay on these loans.
What does the manager invest in?
The biggest part of the portfolio consists of packages of mortgage loans. It gets the interest which the property borrowers pay.
It also has packages of consumer loans, generating cash from personal assets like credit card debt.
What do the experts like?
James Klempster, of Momentum Global Investment Management, says lower-quality credit – typically cheaper because there is more risk that borrowers will not be able to pay loans back – could be a strong sector as interest rates are at historic lows.
‘We believe TwentyFour to be specialists in this field,’ he says.
Klempster says borrowers may be unable to pay back loans. If investors want less risky assets, they may sell shares in TwentyFour and cause their value to edge down.