BK Opportunities Fund 5 - Crystal Fund

BK Opportunities
Fund 5

Quarterly Report | 30th June 2023

BK Opportunities Fund-5 (Euro) will make its quarterly distribution to its investors for the 30th June 2023 quarter-end of 10.00% (cash on cash, non-annualized) of its capital contribution. Payments will be wired on the 27th of July, 2023.

Furthermore, the N.A.V. of BK Opportunities Fund-5 (Euro) as of the 30th of June 2023 after the distribution is 76.93%.

BK Opportunities Fund-5 (Euro) updated performances are:
June 2023 Monthly Return (non-annualized): 1.79%
June 2023 Year-to-Date (non-annualized): 18.35%
June 2023 Annual Return since inception1: +6.38%
Cumulative Distributions since inception/July 20182: +50.50%
Cumulative Return since inception/July 20182 (Distributions + NAV gain): +27.43%
(1) Based on the weighted average internal rate of return (“IRR”) of all classes from their respective closing date at their respective entry price
(2) Based on the number of shares (or the capital contribution) in the fund, i.e. assuming an entry price of €1,000 per share or 100.0%

Market Commentary & Portfolio Overview

In a less event full quarter than what we could observe for the last years, the euro was headed for its longest winning streak against the dollar since 2004 as investors bet the Federal Reserve is close to ending its campaign of interest-rate hikes. The same underlying issues are the war in Ukraine, high inflation, and rising interest rates lingering over the growth block.

The Economy: ECB Less Determined on Inflation Containment

The euro area's inflation story is complex, the headline inflation has been retreating strongly to 6.1% from its 10.6% pick in October 2022, but the core inflation (except for those from the food and energy sectors) has only stabilized around 5.3%. The effects of the previous rate increase slowly materialize into actual price stability. The ECB's deposit rate — currently 3.25% to 4.00%- is expected to increase by 25 basis points in July. As we advance, the picture is less clear as European Central Bank Governing Council member Klaas Knot said monetary tightening beyond the July meeting is anything but guaranteed — suggesting officials could soon pause their unprecedented campaign of interest-rate hikes. The delicate balance for the central bank is to keep prices in check without creating significant economic damage.

Corporate Markets: Solid Performance

European equities performed solidly over the first half of 2023 as the MSCI Europe Index delivered a total return of 14.2%. Overall, a resilient European economy has helped underpin this performance. Feared economic disruption caused by potential energy shortages never materialized. And although the eurozone economy is now technically in recession following its -0.1% contraction in Q1 2023 and Q4 2022’s revised -0.1% GDP print, there has been scant evidence of any hard landing thus far in this unprecedented rate-hiking cycle. Meanwhile, lower inflationary pressures across the continent, robust corporate earnings and the visible end of the rate hikes have given investors further reasons for optimism.

Corporate Loans: Credit Cycle on Target

The European trailing 12-month Leveraged Loan Default Rate by amount increased to 2.2% in June following the Euro Credit Suisse Western European Loans index. As expected, the Euro-leveraged finance sector outlook is deteriorating, with default rates expected to continue to rise. Slowing economic growth and rising interest rates put pressure on highly leveraged borrowers. An important point to remember is that not all corporations are the same, as a large cohort of secular-growth firms is better positioned to withstand the macroeconomic and credit market pressures. We still expect more opportunities in the IG area than in high yield.

CLO Market: Slow Activity

The European CLO market saw a slowdown in issuance in the second quarter, with only four new transactions priced with a total of 5.0€ billion in issuance. However, the credit enhancement and spreads for these transactions aligned with the levels seen in the first quarter.

BK Opp. Fund 5: Performances

This quarter, BK Opportunities Fund-5 is making a distribution of 10.00% to its investors. Payments will be wired on or around the 26th of July 2023 — the total distribution since inception is at 50.50% of the Capital Contribution. The cumulative return as of 30th June 2023, which blends distributions and NAV profits, is 27.4 % or 6.4% on an annual basis. In the current context, our positions are priced (by brokers and dealers) conservatively, but our anticipations for the fund’s overall return are unchanged. The focus now is to monetize the remaining value and distribute all proceeds to investors.

Fund and Market Performances as of 30th June 2023

Monthly Performances

Quarterly Distribution

Cumulative and Quarterly Distribution

Fund’s Summary

Currency EUR
Fund’s Inception August 2018
Last Closing October 2019
Maturity5 October 2024
Distribution Quarterly6
Investment Manager Oristan Ireland DAC
Administrator Apex Funds Services
Custodian CIBC Bank & Trust
Counsel Dillon Eustace
Auditor Deloitte
Bloomberg Page BKOPP5A KY
(5) Excluding the possible 2‐year extension
(6) First quarterly distribution made on 30th June 2019

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.