The research company said current net gearing sat at an average of 8% equivalent of net assets, with the majority of credit facilities up to a year in length.
But the group said it suspected many boards would revisit their arrangements, given that interest rates looked set to rise from 2016.
Particularly for funds over a certain size, Winterflood said current arrangements were readily available at a reasonable rate of interest, with a spread of 100bps above Libor proving common at the moment. In addition, multi-currency arrangements were being used increasingly to gain FX exposure, it said in its December research note.
Rising interest rates
“At a time of sustained low interest rates other forms of debt appear expensive by comparison, including ZDPs. However, with the Governor of the Bank of England providing guidance that interest rates could start to rise from 2016, we suspect a number of Boards will look anew at their debt arrangements.
“It seems to us that locking in low rates at this stage of the interest rate cycle makes sense, even if there is a premium to be paid in the short term.”
Winterflood pointed to Temple Bar, which announced in the summer it had taken a £50m fixed rate private placement loan note at a coupon of 4.05%.
It added that 57% of the closed-end universe had no gearing, 24% had gearing of 0-10% and 19% of trusts had gearing above 10%.
