BK Opportunities Fund 4 - Crystal Fund

BK Opportunities
Fund 4

Quarterly Report | 30th September 2023

BK Opportunities Fund-4 is making a quarterly distribution to its investors for the 30th September 2023 quarter-end of 5.55% (cash on cash, non-annualized) of its capital contribution (in USD). Payments will be wired on the 4th of November, 2023.

Furthermore, the N.A.V. of BK Opportunities Fund-4 as of the 30th of September 2023, after the distribution, is 10.03% of its capital contribution (in USD).

BK Opportunities Fund-4 updated performances are:
September 2023 Monthly Return (non-annualized): +0.4%
September 2023 Year-to-Date Return (non-annualized): +16.3%
September 2023 Annual Return since inception(1): +6.1%
Cumulative Distributions since inception/Mar. 20172: 118.8%
Cumulative Return since inception/Mar. 2017 (Distributions + NAV gain)(1): +28.8%
(1) Based on the weighted average return of all classes since their respective closing date.

Market Commentary & Portfolio Overview

The US economy is showing substantial growth and optimism against many predictions and the various international crises unfolding.

The Economy: Consumer Keeps Consuming

For Q3, the US economy grew by 5.4%, significantly more than in Q1 and Q2, 2.2% and 2.1% respectively. The main driver of this expansion was consumer spending, which has defied expectations of a slowdown or recession. All eyes are on consumer spending, sentiment, and inflation data to gauge the economy's trajectory. The inflation number stayed stable at 3.7%, while it is still higher than the Fed target rate but is considered as evidence the Fed policy worked to keep prices under control. Jerome H. Powell, the chair of the Federal Reserve, reiterated the central bank’s commitment to moving forward “carefully” which could be translated at a high rate for longer depending on the market evolution. The main outstanding question is what to expect from the future, the bond market's inverted yield curve, often a precursor to recession, has lessened but still suggests concerns about future growth, leading to uncertainty in the market.

Corporate Markets: Still Optimist

In October, US business activity rebounded, with the S&P Global Composite Output index reaching a three-month high of 51, indicating growth after two stagnant months. This improvement was driven by increased factory demand and reduced service-sector inflation. The composite gauge of selling prices fell to a three-year low due to decreased inflationary pressures at service providers, aligning with efforts to boost sales and attract customers. Despite increased cost pressures in manufacturing due to higher oil prices, the sector stabilized after five months of contraction, reaching a score of 50. Service providers continued to hire, but manufacturers reduced headcount, citing uncertainty and cost-saving measures. Despite challenges, optimism about the future was high across US industries, supported by expectations of more robust demand and improved hiring and expansion prospects.

Corporate Loans: Robust Performance

The leveraged loan trading market has seen robust performance in 2023, with the Morningstar LSTA US Leveraged Loan Index achieving high returns amid soaring interest rates. Despite this, new issuance remains low, reaching 14-year lows, as companies increasingly turn to private credit and secured funding in the high-yield market. A survey revealed 82% of respondents expect fund allocations to favor private credit over broadly syndicated loans and bonds. Leveraged loans are anticipated to outperform high-yield bonds in Q4, and respondents believe floating-rate loans will continue to excel. Additionally, the survey indicated concerns about deteriorating fundamentals impacting credit portfolios, with defaults and restructurings being a significant worry for market professionals.

CLO Market: Resilience under Elevated Rate

In the third quarter, lower funding costs encouraged more managers to tap into the CLO (Collateralized Loan Obligation) market, although light new loan supply and elevated benchmark rates prevented CLO issuance from reaching the levels observed in 2021 and 2022. Year-to-date CLO issuance is down by 21.5% as of the third quarter. However, interest in the private credit space remains strong, with middle-market CLO issuance nearly doubling last year's total and accounting for a 22% share of total new issuance, up from 8%-12% in the past six years. Improved macroeconomic conditions and market expectations of a soft landing have tightened spreads. Leveraged loan credit metrics also improved, with a lower 12-month default rate and a declining percentage of distressed leveraged loans.

BK Opp. Fund 4

BK Opp. Fund-4 is making a distribution of 5.55% ($55.50 per share) this quarter (payments are being wired on or around the 3rd of November 2023), bringing the total distribution since inception at 118.80% ($1,188.00 per share) non-annualized. The cumulative return as of 30 September 2023, which blends distribution and NAV profits, is +28.83%. Based on the weighted average internal rate of return (IRR) of all classes since inception at their respective entry price, BK Opp. Fund-4 annual return is +6.13% (all returns are net). This fund is now in its amortization period; hence the main focus is to monetize the remaining positions.

Quarterly Summary

Fund and Market Performances as of 30th September 2023

Monthly Performances

Cumulative and Quarterly Distribution

Fund’s Summary

Currency USD
Fund’s Inception April 2017
Last Closing July 2018
Maturity5 July 2025
Distribution Quarterly
Investment Manager Oristan Ireland DAC
Administrator Apex Funds Services
Custodian CIBC Bank & Trust
Counsel Dillon Eustace
Auditor Deloitte
Bloomberg Page BKOPP4A KY
(5) Excluding the possible 2‐year extension

Portfolio Manager
Olivier Gozlan


+44 208 089 11 35
This is not for distribution to, or use by, any person or entity in any jurisdiction where such distribution or use would be contrary to law or regulation. The information contained herein is for information only and does not constitute an offer regarding any product. The document has been prepared by Oristan Ireland DAC and the data have not been audited nor verified. Past performance cannot indicate future performance. There is no assurance that the investment objective will be achieved and investment results may vary.