23 May 2025

CQS New City High Yield Fund Limited
("NCYF" or the "Company")

Monthly Factsheet as at 30 April 2025

The Company's Fact Sheet as at 30 April 2025 has been submitted and is available for inspection on the Company's website, https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd/.

Investment Manager's Report

Ian 'Franco' Francis, Investment Manager at New City High Yield Fund comments:

In recent weeks, global markets have been focused on the multitude of tariffs introduced and subsequently delayed by US President Trump. The US treasury markets signalled displeasure over the effects that tariffs would have on the economy and inflation in the US. Most investors dislike tariffs as they create uncertainty in all markets, be it government bonds, currency markets, corporate debt or equities. They contribute to inflation, which is ultimately passed on to the consumer, and cutting margins for companies if they cannot pass on the full costs. Additionally, they create poorer productivity in the country implementing the tariffs as their economy cannot produce the same product as cheaply as those with lower wage costs. It will likely motivate countries who have had these tariffs imposed to look for other trade partners for their goods and do trade deals away from the US. Whatever the final outcome, it appears the fundamentals that support world trade will change. 

In the UK, the collapse in business confidence was only to be expected as higher staffing costs kicked in with a higher minimum wage and increased National Insurance payments. The S&P Global Flash UK PMI Composite Output Index cratered to 48.2, down from 51.5 in March, as higher costs are negatively impacting major spending plans amongst customers, both domestically and in export markets. The employment outlook was also poor as job cutting was seen by many companies as one of the options to offset higher costs and lower order books. The net result in the short-term has been an interest rate cut from the Bank of England with more expected later in the year.

Europe in contrast saw manufacturing hold up better-than-expected despite the 10% general tariff and 25% auto tariff imposed by the US. Falling energy costs helped, as did the increase in defence spending and infrastructure as Europe took more responsibility for its overall defence, reducing its reliance on America. Whilst the service sector has proved a consistent poor performer since February 2024, there is a hope of recovery with the defence and infrastructure spending, which should benefit all sectors of the economy.

The US witnessed a marked slowdown of activity alongside a fall in optimism about the future growth of the economy. Inflation, led by tariffs and increasing wage costs, has led to output prices in manufacturing increasing by the most in over two years. This likely gives the Federal Reserve a headache as a cooling economy appears in need of a rate cut. The tariffs will also hit supply chains for many US industries as many of their components come from countries with high tariffs. West Coast ports will likely see a large fall in cargos which in turn will put a lot of logistics jobs at risk. A lot depends on how trade deals develop by the end of the 90 day "cooling off" period announced by the President following the market sell-off witnessed after the 2nd April "reciprocal tariff" announcement.

For the Company, we announced the third interim dividend of 1p per share and went ex-dividend at the end of the month. It was a quiet month for transactions given the volatility and wide spreads associated with the market turmoil. We added to Boparan 9 3/8% 2029, the only purchase in the month. Selling was limited to a scrap of Co-op Bank 11 ¾ 2034 as they had not participated in the market fall. The beginning of May looks to be settling down with more liquid markets returning.

-ENDS-

About CQS New City High Yield Fund Limited

CQS New City High Yield Fund Limited aims to provide investors with a high dividend yield and the potential for capital growth by investing in high-yielding, fixed interest securities. These include, but are not limited to, preference shares, loan stocks, corporate bonds (convertible and/or redeemable) and government stocks. The Company also invests in equities and other income-yielding securities.

Since the Fund's launch in 2007, the Board has increased the level of dividends paid every year. As at 31 December 2024, the Company's dividend yield was 8.79%. In addition to quarterly dividend payments, the Fund seeks to deliver investors access to a high-income asset class across a well-diversified portfolio with low duration to help mitigate interest rate risk.

Further information can be found on the Company's website at https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd/