BK Opportunities Fund 6 - Crystal Fund

BK Opportunities
Fund 6

Quarterly Report | 30th September 2023

BK Opportunities Fund-6 will make its quarterly distribution to its investors for the 30th September 2023 quarter-end of 13.50% (cash-on-cash, non-annualized) of its Contribution Amount (in USD). Payments will be wired on the 7th of November, 2023.

Furthermore, the N.A.V. of BK Opportunities Fund-6 as of 30 September 2023 after the distribution is 62.09%.

BK Opportunities Fund-6 net performances as of 30th September 2023 are:
September 2023 Monthly Return (non-annualized): +0.5%
September 2023 Year-to-Date Return (non-annualized): +17.7%
September 2023 Annual Return since inception: +4.4%
Cumulative Distributions inception/May 20192: 53.5%
Cumulative Return since inception/May 2019 (Distributions + NAV gain)1: +15.6%

(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 6: Performances

BK Opportunities Fund-6 is making a distribution of 13.50% this quarter (payments will be wired on November 7, 2023), bringing the total distribution since inception to 53.50% non-annualized. This amount is compounded with interest receipts, trading gains, and capital proceeds from deals’ redemption.

The annual return since inception is +4.4%, below our expectations, but the valuations of our portfolio, provided by counterparties, brokers, and dealers, are very conservative. As we collect coupons & principal (and distribute to investors) and, in some cases, sell positions, the fund’s performance should increase and reach a level closer to our target. The fund is now focusing on monetizing its positions. If an outright sale can be considered, we are also working on redeeming our remaining positions.

Quarterly Summary

(1) Cash on cash, based on the Contribution Amount.
(2) Since the inception of BK Opportunities Fund-6, May 2019.
(3) Net Asset Value after distributions as of 30th September 2023, as a percentage of Contribution Amount.
(4) Sum of the cumulative distributions since inception and the 30th September 2023 NAV.

Fund and Market Performances as of 30th September 2023

(7) Based on the total return level of the JPMorgan CLO Index “CLOIE” for post-crisis CLO tranches rated BB (respectively B).
(8) Index designed to represent the overall hedge fund universe.
(9) S&P LSTA US Leverage Loan Index Total Return, sums principal, interest and reinvestment returns

Monthly Performances

Cumulative and Quarterly Distribution

Fund’s Summary

Currency USD
Fund’s Inception May 2019
Last Closing February 2020
End of Reinvestment Period February 2023
Maturity5 February 2025
Distribution Quarterly6
Investment Manager Oristan Ireland DAC
Administrator Apex Funds Services
Custodian CIBC Bank & Trust
Banker Northern Trust
Counsel Dillon Eustace
Auditor Deloitte
Bloomberg Page BKOPP6A KY
(5) Excluding the possible 2‐year extension
(6) First quarterly distribution made on 30th September 2020

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.