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STRATEGY European & US CLO equity and debt |
CURRENT PRICE EUR 3.96 |
NAV PER SHARE EUR 4.11 (est., 05 Oct 2026) |
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DISCOUNT / PREMIUM TO NAV ‑3.6% (discount) |
YTD TOTAL RETURN N/A |
AUM (TOTAL ASSETS) EUR 148.5m (05 Oct 2026) |
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DIVIDEND YIELD ~10.1% (fwd, EUR 0.40 ann.) |
NEXT DIVIDEND EUR ~0.10 (Q3, exp. ex-div ~12 Nov, pay ~04 Dec 2026 — not yet declared) |
TER (ONGOING CHARGE) 0.55% (31 Dec 2025; excl. perf. fee) |
Arthur, here is the simple version: Fair Oaks Income Fund lends money to hundreds of companies by buying the riskiest — and highest-paying — slices of specialised debt-packaging vehicles called CLOs.
There is a market where banks bundle together hundreds of corporate loans — money lent to businesses like private-equity-backed manufacturers, retailers and infrastructure firms — into a single structure called a Collateralised Loan Obligation (CLO). That CLO then provides exposure to portfolios consisting primarily of US and European floating-rate senior secured loans. The CLO issues different classes of debt to different investors, ranging from very safe (AAA-rated, low yield) at the top to very risky (unrated "equity", high yield) at the bottom. Fair Oaks sits deliberately at the bottom of that stack, buying what are called Subordinated Notes — the last to be paid but the first to collect excess cash flows when the underlying loans perform.
The fund aims to generate attractive, risk-adjusted returns principally through income distributions. It does this by exploiting a structural arbitrage: the portfolio's underlying loans generate a spread of about +3.5% over benchmark rates, while the CLO structures borrow at a weighted average cost of only EURIBOR/SOFR + 1.80%, capturing a net interest margin on a leveraged base that translates into very high cash yields on its CLO Subordinated (Equity) Notes. Because the loans pay floating rates (tied to EURIBOR or SOFR), investors also benefit automatically when interest rates are high.
The fund has recently reviewed its portfolio in response to changes in the CLO market, and the chair noted the move to euro reporting was logical given most of the portfolio is now euro-denominated and more diversified across CLO debt and equity positions. The fund is now focused on European CLOs at approximately 91% of the portfolio, with a legacy 9% in US assets. A 1-for-10 share consolidation was also completed in 2026, and the dividend was reset to a more sustainable level targeting approximately 10% of NAV per year.
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Step 1 Raise Capital Investors buy FAIR shares on the London Stock Exchange, providing equity capital to the fund. |
Step 2 Invest via Master Funds Capital flows into FOIF II LP and FOMC III LP — the Guernsey limited partnerships that actually hold the CLO positions. |
Step 3 Buy CLO Positions Master funds acquire subordinated notes (equity) and mezzanine debt tranches in US and European CLOs in primary and secondary markets. |
Step 4 Collect Loan Cash Flows Hundreds of underlying corporate borrowers pay floating-rate interest; CLO structures pass excess cash up the waterfall to FAIR's equity tranche after paying senior noteholders. |
Step 5 Pay Quarterly Dividends Cash distributions flow back to FAIR shareholders as quarterly dividends — currently €0.01 per share per quarter, targeting ~10% of NAV annually. |
PORTFOLIO COMPOSITION
Asset-class breakdown per the Annual Report and Audited Financial Statements (31 December 2024) and July 2026 monthly update, as reported by Fair Oaks Capital Ltd.
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Short version: a plain-English explainer and key figures only. It contains no investment rating, thesis or valuation - those are in the full deep-dive report, which is produced separately for selected companies.