I used to own the NAOS 4.95% 3Dec24 bond IRL. Got rid of it about a year ago when interest rates kept going up as there were a number of better options with about the same risk level and much better returns (I pivoted toward BBSW+ floating rate bonds for a large proportion of the portfolio).

It will be interesting to see what happens with that when it matures into what will likely be a higher interest rate environment.

I believe NSC is the best performing of the 3 NAOS LICs and the only one without a convertible.

NCCGA now has less than 3 years to the first step up date and the YTM p.a is somewhere between 8.5 and 10%. So duration risk is not much of an issue IMO.

There's minimal credit risk - the recovery rate on the bonds should only start to dip below 100% as NTA approaches nil.

The liquidity is shocking, but if you're planning on holding to maturity and you have sensible exposure then it's not so much of an issue.

There's a risk that NAOS let the bonds "step up" to 5.5% and 6.5% instead of letting them mature early. This would lower the YTM, but the returns would still be acceptable.

I think there's asymmetric risk adjusted returns on offer, which are probably explained by a classic illiquidity premium.

There's also outside possibilities of upside from:

a) The imbedded option becomes in the money.

b) A higher IRR than the YTM p.a if interest rates go back down.