TwentyFour Select Monthly Income keeps its cool and tops up dividend during Middle East crisis
- 24 April 2026
- QuotedData
TwentyFour Select Monthly Income (SMIF) has bounced back from the fund’s worst month in three years when its portfolio of bank and corporate debt fell 2.7% in March. The declaration of a top-up interim dividend and resumption of share issuance shows the £300m investment company is back on track after being knocked by the fallout from the US-led war on Iran. Confidence is based on the relatively high credit rating of its investments, although its managers remain vigilant over the path of inflation.
Despite the uncertainty gripping the global economy as oil prices bounce around $100 a barrel following Iran’s blockade of the Strait of Hormuz, the 8.6%-yielder last week said it would pay in May a half-year 0.25p per share special dividend on top of its monthly 0.5p distribution for the second time in two years.
The board of the investment company, the only one in the listed loan and bond funds sector to pay a monthly dividend, said after “careful consideration” of income prospects and market risks, it expected dividends would exceed 6.5p per share in the year to 30 September. That’s ahead of the 6p annual target SMIF has either hit or bettered since launch in 2014.
That was reassuring after last month’s decline in net asset value (NAV). The March wobble, while modest compared to steep drops in many equity funds, was the biggest fall since March 2023 when the fund’s financial holdings were caught up in the crisis over US regional banks and the run on Credit Suisse saw it shed 3.3%.
The worst month in recent years was in September 2022 when Liz Truss’ notorious “mini-Budget” prompted a selloff of UK government bonds, rocking European credit markets and knocking 7.8% off the NAV.
While these setbacks proved to be temporary, they are unnerving for an investment company seeking to provide stable capital and income returns from the debt issued by corporate borrowers with less than impeccable credit ratings. At the end of March, nearly a third of the fund was in loans and bonds on the lowest BBB investment grade credit rating with most of the remainder rated below investment grade at BB and B.
No reason to panic
Although some borrowers could struggle to maintain loan repayments in a serious downturn, SMIF’s chair Ashley Paxton had already indicated he wanted to keep a steady hand on the tiller. Earlier this month he told QuotedData that “we’re not aware of any reason” to change the positive outlook the board stated at the annual results in December when the then solid economic picture and high yields on bonds made them confident about the year ahead.
For the year to September 2025, the company declared a 1.3p final dividend which with the half-year top-up took the total to 7.3p. It paid 7.4p per share in the previous two years.
As the shock of a 44% surge in oil prices hit global assets, including the debts in which SMIF invests, shares in the £298m closed-end fund briefly traded slightly below the value of its assets last month. A quarterly facility letting shareholders sell shares at close to their real worth saw an increase in investors tendering their stock.
Sentiment towards listed debt funds has cooled amid problems in US private credit funds exposed to software companies facing intense competition from rivals using artificial intelligence. However, SMIF only invests in publicly-traded debt.
The board’s calm posture was vindicated as the US, Israel and Iran began a fragile ceasefire after a month of attacks, and SMIF returned to stand at a 2% premium over NAV, enabling the company to issue more shares. Like several of its peers, the company has been a consistent issuer of paper, adding around £140m to market value in three years as it catered to demand from income investors.
“Orderly” selloff
George Curtis one of seven portfolio managers at TwentyFour Asset Management overseeing SMIF, said investors had over-reacted to the inflationary threat posed by soaring energy prices, but said the selloff had at least remained “orderly”.
At one point, markets forecast the Bank of England and European Central Bank would hike interest rates three times this year, instead of the cuts in the cost of borrowing they had expected before the US and Israel began air strikes against Iran.
Rising interest rates depress loan and bond prices as their mostly fixed levels of income become less attractive, although there are “floating rate” bonds that SMIF also holds whose prices can be more resilient.
Curtis said TwentyFour’s view was that US President Donald Trump was politically incentivised to do a deal with Iran and avoid high fuel prices damaging his prospects in the US mid-term elections in November.
However, he was wary that the longer oil supplies were disrupted, the bigger the impact on energy prices would be. This could make it difficult for central banks to look through what should be a transitory spike in inflation and avoid hurting an already slowing economy with interest rate rises.
He said the next few weeks would be critical. “The key for central banks is whether inflation expectations for the next three to five years move up in response.” Any evidence of rising wage demands, for example, could force rate setters to act.
Underlining the precariousness of the situation, data this week showed UK annual inflation jumped to 3.3% in March from 3% in February. Rises in petrol, heating oil and airfares – all linked to the squeeze on oil – were largely to blame.
Protection trades
With markets on tenterhooks as to the direction of interest rates, Curtis said the TwentyFour team had refrained from making big changes to the diversified pool of mostly short and medium-term loans of one to ten years.
However, during last month’s turmoil they had added “crossover protection”, using a credit default swap index. This shielded the loan portfolio from price falls caused by the yield gap, or “spreads”, to benchmark government bonds widening. As prices and yields move in opposite directions, higher yields could damage a fund’s capital.
At the same, however, rising yields offer the chance to lock in higher levels of income for shareholders. This is exactly what Curtis did with “extension trades” enabling him to sell a short-term debt and buy a long-term one on the same yield.
Curtis said the normalisation of interest rates that saw the Bank of England base rate accelerate from 0.25% in January 2022 to 5.25% 18 months later had hugely benefited SMIF investors even if the cost of borrowing had come back down to 3.75% in January.
He said this had resulted the average yield from SMIF’s investments over their purchase price had risen 1.5% to 8.5% in the past three years, underpinning a 55% total shareholder return ahead of its peer group’s 43% average.
Meanwhile, Curtis said the portfolio’s average BB credit rating was the highest it had ever been meaning investors were getting a good return for the risk they were taking.
Written By Gavin Lumsden
