abrdn Closed-End Funds
FOR US INVESTORS ONLY
Important Information:
Closed-end funds are traded on the secondary market through one of the stock exchanges. The Fund’s investment return and principal value will fluctuate so that an investor’s shares may be worth more or less than the original cost. Shares of closed-end funds may trade above (a premium) or below (a discount) the net asset value (NAV) of the fund’s portfolio. There is no assurance that the Fund will achieve its investment objective. Past performance does not guarantee future results.International investing entails special risk considerations, including currency fluctuations, lower liquidity, economic and political risks, and differences in accounting methods; these risks are generally heightened for emerging market investments.Concentrating investments in the specific regions subjects the Fund to more volatility and greater risk of loss than geographically diverse funds.Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).The Fund’s use of leverage exposes the Fund to additional risks, including the risk that the costs of leverage could exceed the income earned by the Fund on the proceeds of such leverage. Additionally, in the event of a general market decline in the value of the Fund’s assets, the effect of that decline will be magnified in the Fund because of the additional assets purchased with the proceeds of the leverage.Your portfolio may not have the same asset class weightings. Asset class weightings are subject to change.Diversification does not ensure a profit or protect against a loss in a declining market.Some of the information in this document may contain projections or other forward looking statements regarding future events or future financial performance of countries, markets or companies. These statements are only predictions and actual events or results may differ materially. The reader must make his/her own assessment of the relevance, accuracy and adequacy of the information contained in this document, and make such independent investigations, as he/she may consider necessary or appropriate for the purpose of such assessment.Any opinion or estimate contained in this recording is made on a general basis and is not to be relied on by the reader as advice. Neither ABRDNnor any of its agents have given any consideration to nor have they made any investigation of the investment objectives, financial situation or particular need of the reader, any specific person or for any loss arising whether directly or indirectly as a result of the reader, any person or group of persons acting on any information, opinion or estimate contained in this document.
abrdn Closed-End Funds
abrdn Global Income Fund, Inc. (FCO) - March 2024 Update
In this episode, Adam McCabe joins Mike Taggart to discuss FCO.
00:00:00:00 - 00:00:31:24
Mike Taggart
Welcome to the latest podcast for the Aberdeen Global Income Fund. Ticker symbol FCO. I'm Mike Taggart, Aberdeen's U.S. closed end funds specialist today joining us from Singapore. We have Adam McCabe, Aberdeen's head of Asian fixed income and the portfolio manager for FCO. Adam, thank you for taking the time to speak with us today.
Adam McCabe
Thanks, Mike.
Mike
Adam, FCO is a go anywhere high yield bond fund.
00:00:32:01 - 00:00:57:23
Mike
It must rely heavily on Aberdeen's global research capabilities. Can you tell us about the research team and your investment process?
Adam
Well, Mike, believe it or not, FCO was not always a go anywhere Global High Yield Fund. It was initially launched in the in the eighties and its focus was to invest in Commonwealth bonds. So that is quite a narrow universe.
00:00:58:00 - 00:01:30:12
Adam
Back in the day, those Commonwealth countries Australia, Canada, the UK. Bond yields in those markets were higher than the US and so that was quite an attractive opportunity for US investors to exploit high quality investments outside of the US that yielded very attractive yields. Of course, time has passed and yields have fallen quite aggressively in many of those markets, particularly in Australia, Canada and the UK.
00:01:30:14 - 00:01:55:17
Adam
And what we what what we did as an investment management team over the course of the year reprofile the fund away from the Commonwealth to focus on a broader suite of global opportunities to continue to focus on the income opportunities that avail themselves to investors around the world and not be so narrowly focused on on the Commonwealth countries.
00:01:55:19 - 00:02:26:08
Adam
So we now invest in emerging markets, we invest in in high yields both in in the US, Europe and Asia, but we still have some investments in some of the Commonwealth countries such as Australia, talking about our investment process. The team of course. Aberdeen has a global footprint. We manage a significant amount of the investments for investors around the world in fixed income.
00:02:26:10 - 00:02:52:24
Adam
And one of the things that sets us apart is that we have a global footprint, but also that global footprint brings local insight and together the global and local insights that that marry together allow us to be informed by what's happening on the ground in the US in Europe, in Asia, but also to manage the risks within the global context.
00:02:53:01 - 00:03:16:04
Adam
In essence, the way I would characterize that process is that we are fundamental research driven investors that tailor our security selection to the overall environment.
Mike
Excellent. And I mean, that's thanks for the history there, too. I had I actually didn't know that. Why should you know right now, U.S. investors be interested in investing in fixed income markets outside of the US?
00:03:16:08 - 00:03:47:23
Adam
Well, I think there's a lot of focus in the U.S. around the Federal Reserve's policy around the economic cycle. And I think we, along with many, are optimistic that the US economy can be resilient and that can obviously help support the high yield market. However, one thing that I would caution investors to do is to not be too complacent as the economic climate I guess darkens or as we slow down in terms of economic growth.
00:03:48:00 - 00:04:24:23
Adam
It pays to be diversified. And if for whatever reason, the US economy slows more aggressively, if those high yield companies that that have borrowed at very cheap rates are now struggling to refinance at higher rates, then that could be a problem for us high yield. And our view is that it's a case to diversify. Whether that's into Europe, the U.K., emerging markets or Asia, we can benefit from diversity in the economic cycle and some differences in terms of of balance sheet management of companies.
00:04:25:00 - 00:04:56:09
Adam
I'd also highlight that in emerging markets. One of the things that holds a lot of companies back in terms of their credit rating is that what we know is a sovereign credit ceiling. So if the sovereign credit rating is saying let's just say for the sake of argument triple B, then the best that a company can be ready that comes from that country can be triple B, It could be a multinational that has a great business that is actually stronger than a sovereign.
00:04:56:11 - 00:05:19:06
Adam
But for reasons of the sovereign credit ceiling, it can't be rated higher than the sovereign. And that holds it back in terms of of the credit rating. And as a result, it means that the company needs to borrow at a high higher spread or higher yield. Great opportunity.
Mike
Interesting. That leads right into my next question is that the investment objective for FCA is to seek high current income.
00:05:19:08 - 00:05:43:17
Mike
And so how does that affect your security selection when it comes to uh FCO?
Adam
Well, I guess one of the one of the considerations is obviously looking for those high yielding opportunities that that I mentioned. We I mentioned the historical shift away from the what were the lower yielding Commonwealth countries into high yielding PGM and high yield corporate securities.
00:05:43:19 - 00:06:20:22
Adam
But one of the one of the considerations that we're having at the moment is that we don't need to necessarily just migrate down the credit curve. In fact, our US high yield team are looking at higher quality, high yield opportunities that are paying income. And even in a market such as Australia that went from being a high yield of back in 1986 to a low yield in 2021, 22 is now giving us opportunities to invest in high quality exposure with a very handsome income.
00:06:20:24 - 00:06:51:13
Adam
And so what I would say about this portfolio is that we just don't sit there and just buy high yield for the sake of buying high yield with thinking about the credit risk profile. We're thinking about what what rewards us from a risk adjusted exposure, risk adjusted income generation perspective.
Mike
And then looking at the funds fact sheet at the end of January, about a quarter of the portfolio is in the Asia Pacific region, and then a fifth was in Latin America.
00:06:51:15 - 00:07:26:17
Mike
What's going on in those two areas of the world that make them compelling investment regions?
Adam
There's two parts of the story. Firstly, is that inflation has not been a problem as it was in the US, in Asia and emerging markets outside of Asia. So that means that there is that opportunity for central bankers to provide support. Now, it's not going to happen necessarily without the Federal Reserve showing its hand that the central bank is around the world will wait until Jerome Powell shows showed his hand.
00:07:26:19 - 00:07:58:04
Adam
However, we're in a much better position from an inflation perspective. Second, diversification. Again, we've put about all of our eggs in one basket. We're hitching a ride alongside of US policy makers, politics and whatnot. Diversifying to secure that income is very appealing. And then thirdly, I would say that one of the things that this portfolio has done over the course of the past few years is hold a very large exposure to US dollars.
00:07:58:06 - 00:08:32:01
Adam
Now, I referenced the Australian dollar market. I referenced being able to build exposures at a relatively attractive yield in Australian dollars at very high credit quality, and that's something that we've been doing, we've been building over the course of the past few months. So that diversity into non dollar assets. The reason I like non dollar assets at this point in time, the US dollar has benefited from exceptionalism that carry supported by higher policy rates relative to the rest of the world.
00:08:32:03 - 00:09:01:01
Adam
As the Federal Reserve looks to ease, the tide can rise everywhere else. And so we're looking to build that high quality, high yielding exposure in markets outside of the US.
Mike
Great. Well, thank you, Adam. Really appreciate you taking the time to give us the update on FCO. And thank you everyone for listening to this podcast. There are three convenient ways to learn more about FCO on the internet.
00:09:01:01 - 00:09:37:23
Mike
Visit abrdnfco.com Email us at Investor.Relations@abrdn.com or give us a call at 1 800 522 5465. I'm Mike Taggert of Aberdeen. Thank you for listening.
00:09:38:00 - 00:10:05:01
Unknown
This podcast is provided for general information only and assumes a certain level of knowledge of financial markets. It is provided for informational purposes only and should not be considered as an offer, investment recommendation or solicitation to deal in any of the investments or products mentioned herein and does not constitute investment research. The views in this podcast are those of the contributors at the time of publication and do not necessarily reflect those of Aberdeen.
00:10:05:03 - 00:10:31:20
Unknown
The companies discussed in this podcast have been selected for illustrative purposes only or to demonstrate our investment management style and not as an investment recommendation or indication of their future performance. The value of investments and the income from them can go down as well as up. An investor's make it back less than the amount invested. Past performance is not a guide to future returns, return projections or estimates, and provide no guarantee of future results.