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For institutional investors only/not for public viewing or distribution
Asset Backed Securities
September 2017
For institutional investors only/not for public viewing or distribution
ABS AUM growth, £ bn
2
Source: TwentyFour31st August 2017
0.1 0.3
0.9 0.8
1.0
1.6
2.8 3.0
4.3
5.8
12.2008 12.2009 12.2010 12.2011 12.2012 12.2013 12.2014 12.2015 12.2016 08.2017
ABS
For institutional investors only/not for public viewing or distribution
TwentyFour’s ABS fund range
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OEIC
Investment Co.
Direct Lending (Inv.Co.)
Bank
Pension Fund
Insurance Co
Mandated Fund
Fiduciary Manager
Segregated MandatesAsset Backed SecuritiesEuropean
TwentyFour Income Fund
UK Mortgages Ltd.
Monument Bond Fund
Senior
Liquid Investment
Grade
Less Liquid/High
Yield
UK CoveredBonds
Senior UK RMBS
IG ABS
Senior UK RMBS
IG ABS
High Yield ABS
Local Authority
High Yield ABS
High Yield ABS
Monument European
ABS
For institutional investors only/not for public viewing or distribution
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UKML – Current Investments
*IRR estimates based on modelled scenarios and calculated from trade inception. There can be no guarantee or assurance that they will be achieved.Source: TwentyFour,14th September 2017
Malt Hill No.1(Coventry Building Society)
Loans originated and purchased in 2015
c. £265m Buy-to-Let loans
Zero loans in arrears
Estimated IRR* 6.48%
Oat Hill No.1(Capital Home Loans)
c. £574m legacy Buy-to-Let loans originated before the crisis
Excellent performance – just 0.8% arrears
Estimated IRR 10.22%
TML(The Mortgage Lender)
Portfolio in ramp-up
New originator began lending in July 2016
Owner-occupied loans
Current completions & pipeline c. £108m
Estimated IRR 9.22%
Available Investment Capital
C. £40m released following Oat Hill securitisation
Currently looking at further investments
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Risk appetite is similar to a lower-risk mortgage lender (e.g. a building society)
For institutional investors only/not for public viewing or distribution
0
100
200
300
400
500
600
700
800
900
AAA AA A BBB BB B
Cre
dit
Sp
read
(b
ps)
ABS/Corporate Spreads
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Source: TwentyFour, Barclays6th September 2017
AAA AA A BBB BB B
Prime RMBS 50 100 155 200 320
Buy To Let RMBS 75 130 175 215
Near Prime RMBS 60 135 180 230
CMBS 105 140 185 250
CLOs 115 175 230 315 565 765
Euro Corps 27 38 76 116 220 394
£ Corps 30 56 104 151 279 473
$ Corps 68 57 84 139 239 394
For institutional investors only/not for public viewing or distribution
Portfolio Highlights
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Portfolio highlights Monument Bond Fund TwentyFour Income Fund
Assets Under Management £368.5m £458.2m
Gross yield (%)* 2.80 6.92
Interest rate duration (years) 0.12 0.12
Credit spread duration (years) 3.30 3.63
Average rating A+ BB+
YTD Performance 3.83% 9.67%
1 year Performance 5.76% 12.67%
3 year Performance 7.13% 13.79%
Past performance is not an indication of future performance. *The gross yield is the yield on an investment before the deduction of taxes and expenses. It is calculated as the annual return on an investment prior to taxes and expenses divided by the current price of the investment. TFIF performance figures are based on NAV per share.Source: TwentyFour 31st August 2017
For institutional investors only/not for public viewing or distribution
Current Market Trends
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H2 2016 saw continued spread tightening and consistent performance with none of the volatility seen in fixed rate credit
markets, driven by central bank policy support and ongoing relative value
H1 2017 exhibited strong technically driven performance
Trend expected to continue, driven by low supply outlook and increasing demand
- Strongest sector performance UK Non Conforming RMBS and CLOs
- Excellent fundamental performance of the asset class
A number of potential threats to sentiment and spread stability exist
Current positioning is cautious
– Should external events overpower the strong technical, then we would expect short windows of excellent investment
opportunities
European ABS expected to be a top performing asset class in 2017
Source: TwentyFour
For institutional investors only/not for public viewing or distribution
Monument Bond Fund Positioning
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Rating breakdown Sector breakdown Geographic breakdown
Non-Conforming Residential mortgage backed securities (NC RMBS), Commercial mortgage backed securities (CMBS), Residential mortgage backed securities (RMBS), Collateralised loan obligations (CLOs), Buy-to-let Residential mortgage backed securities (BTL RMBS) , Prime Residential mortgage backed securities (Prime RMBS).Source: TwentyFour31st August 2017
UK, 54.92%
Mixed, 21.48%
Italy, 5.97%
Netherlands, 4.46%
Portugal, 3.73%
Spain, 3.37%
Germany, 1.20% Cash & Equiv,
4.87%
2.92%
4.87%
5.34%
8.47%
15.25%
21.48%
41.67%
CMBS
Cash & Equiv
Consumer ABS
BTL RMBS
Prime RMBS
CLO
NC RMBS
0% 20% 40% 60%
21
.8%
19
.1%
31
.4%
27
.6%
0%
5%
10%
15%
20%
25%
30%
35%
AAA/Cash& Equiv
AA A BBB
For institutional investors only/not for public viewing or distribution
TFIF Positioning
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Non-Conforming Residential mortgage backed securities (NC RMBS), Commercial mortgage backed securities (CMBS), Residential mortgage backed securities (RMBS), Collateralised loan obligations (CLOs), Buy-to-let Residential mortgage backed securities (BTL RMBS) , Prime Residential mortgage backed securities (Prime RMBS). Mixed Jurisdiction Exposure (look-through basis) looks through to underlying assets e.g. CLOs. Source: TwentyFour. 31st August 2017
Geographical breakdownRating breakdown Sector breakdown
0.2%
1.3%
1.8%
8.9%
10.4%
17.3%
24.8%
35.3%
0% 10% 20% 30% 40%
Student Loans
CMBS
Cash & Equiv
Consumer ABS
BTL RMBS
Prime RMBS
NC RMBS
CLO
8.3
%
6.8
%
11
.4%
15
.8%
21
.5%
23
.6%
1.5
%
11
.1%
0%
5%
10%
15%
20%
25%
AA
A/C
ash
& E
qu
iv AA A
BB
B
BB B
CC
C
NR
39
.5%
6.6
% 1.8
%
6.1
%
3.6
%
6.6
%
13
.6%
4.82%
4.15%
1.19% 0.87%
0.07%
5.58%
5.59%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
UK
Ne
the
rlan
ds
Spai
n
Ital
y
Po
rtu
gal
Ge
rman
y
Fran
ce
Mix
ed
Mixed Jurisdiction Exposure (look-through basis)
Single Jurisdiction Exposure
For institutional investors only/not for public viewing or distribution
European ABS Performance Fundamentals
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In 2016 European ABS credit performance was more positive than the previous year. The upgrade rate reached an all
time high of 19.8% from 14.6% in 2015. The downgrade rate declined to 5.2% from 16.5%
The European ABS sector includes a diverse array of subsectors. CMBS was the worst performing subsector in 2016, but
it is also small, constituting only about 7% of S&P European structured finance ratings outstanding. Most defaults in
2016 were largely CMBS, structured shortly pre-crisis which were most affected by the lower lending standards and
declines in real estate values
CLOs are now one of the largest European subsectors by ratings outstanding and generally performed well in 2016 with
a downgrade rate of only 1.7% and an upgrade rate of 34.9% as many legacy transactions are now amortizing and de-
risking
European structured finance downgrades in 2016 were concentrated in 2006 & 2007 vintages, with generally higher
downgrade rates at the lower rating levels. The investment grade downgrade rate was 2.9% compared with speculative
grade downgrade rate of 10.1%
Source: S&P 2016 Annual Global Structured Rating transitions
For institutional investors only/not for public viewing or distribution
Primary Market Issuance & Rating Distribution
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Primary Market Issuance YTD 2017 is €51.4Bn vs. total issuance €83.4Bn in 2016. However, there is a reasonable primarysupply building in the market and ABS issuance can fluctuate quarter on quarter
Predominantly AAA issuance with mezzanine bonds in the majority of transactions being retained by the issuer in thenon CLO sector. For example, the UKAR sale of Bradford & Bingley’s legacy portfolio totalled £11bn which accounted fora large proportion of UK RMBS issuance YTD
Expect the supply demand imbalance to continue for the foreseeable future which will provide support to strongperformance seen over the last six months
Source: IFR, Bloomberg, Morgan Stanley Research31st August 2017
2017 YTD Issuance Summary by Sector and Country Issuance – Ratings Distribution
Source: IFR, Bloomberg, Morgan Stanley Research Source: IFR, Bloomberg, Morgan Stanley Research
For institutional investors only/not for public viewing or distribution
TwentyFour Asset Management LLP8th FloorThe Monument Building11 Monument StreetLondonEC3R 8AFT: +44 (0)20 7015 8900twentyfouram.com
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For institutional investors only/not for public viewing or distribution
Monument Bond Fund performance
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Past performance is not an indication of future performance. The performance data does not take account of the commissions and costs incurred on issue and redemption. Performance figures are calculated in GBP and are net of all fees for Class I.
Inception date 10th August 2009Source: TwentyFour31st August 2017
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Monument Bond Fund share class I (Acc) Gross 3 month £ LIBOR
For institutional investors only/not for public viewing or distribution
TFIF NAV performance
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Past performance is not an indication of future performance. Source: TwentyFour31st August 2017
Past performance is not an indication of future performance. The performance data does not take account of the commissions and costs incurred on issue and redemption. Performance figures are calculated in GBP and are net of all fees.
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NAV per Share NAV per Share including coupons Share Price Share Price including coupons
For institutional investors only/not for public viewing or distribution
Disclaimer
This document has been prepared by TwentyFour Asset Management LLP ("TwentyFour"), portfolio manager of the Funds, for information purposes only. This document is an indicative summary of the terms andconditions of the securities described herein and may be amended, superseded or replaced by subsequent summaries. The final terms and conditions of the securities will be set out in full in the applicable offeringdocument(s).
This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities described herein. TwentyFour is not acting as advisor or fiduciary. Accordingly you must independently determine,with your own advisors, the appropriateness for you of the securities before investing. TwentyFour accepts no liability whatsoever for any consequential losses arising from the use of this document or reliance on theinformation contained herein.
No offers, sales, resales or delivery of the securities described herein or distribution of any offering material relating to such securities may be made in or from any jurisdiction except in circumstances which will resultin compliance with any applicable laws and regulations and which will not impose any obligation on TwentyFour or any of its affiliates.
TwentyFour does not guarantee the accuracy or completeness of information which is contained in this document and which is stated to have been obtained from or is based upon trade and statistical services or otherthird party sources. Any data on past performance, modelling or back-testing contained herein is no indication as to future performance and there can be no assurance that targeted or projected returns will beachieved, that the Company will achieve comparable results or that the Company will be able to implement its investment strategy or achieve its investment objectives. No representation is made as to thereasonableness of the assumptions made within or the accuracy or completeness of any modelling or back-testing. All opinions and estimates are given as of the date hereof and are subject to change. The value ofany investment may fluctuate as a result of market changes. The information in this document is not intended to predict actual results and no assurances are given with respect thereto.
TwentyFour, its affiliates and the individuals associated therewith may (in various capacities) have positions or deal in securities (or related derivatives) identical or similar to those described herein.
This document is being made available in the UK to persons who are investment professionals as defined in Article 19 of the FSMA 2000 (Financial Promotion Order) 2005. Outside of the UK, it is directed at personswho have professional experience in matters relating to investments. Any investments to which this document relates will be entered into only with such persons. This document is not for distribution to retailcustomers.
No action has been made or will be taken that would permit a public offering of the securities described herein in any jurisdiction in which action for that purpose is required.
This document does not disclose all the risks and other significant issues related to an investment in the securities. Prior to transacting, potential investors should ensure that they fully understand the terms of thesecurities and any applicable risks. This document is not a prospectus for any securities described herein. Investors should only subscribe for any securities described herein on the basis of information in the relevantprospectus (which has been or will be published and may be obtained from TwentyFour by visiting it’s website www.Twentyfouram.Com), and not on the basis of any information provided herein.
TwentyFour Asset Management LLP is registered in England No. OC335015, and is authorised and regulated in the UK by the Financial Conduct Authority, FRN No. 481888. Registered Office: 8th Floor, The Monument Building, 11 Monument Street, London, EC3R 8AF.Copyright TwentyFour Asset Management LLP, 2017 (all rights reserved). This document is confidential, and no part of it may be reproduced, distributed or transmitted without the prior written permission of TwentyFour.
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