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BK Opportunities
Fund 7
Quarterly Report | 30th June 2023
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BK Opportunities Fund-7 (Euro) will make a quarterly distribution to its investors for the 30th June 2023 quarter-end of 3.00% (cash on cash, non-annualized) of its capital contribution. Payments will be wired on the 27th of July, 2023.
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Furthermore, the N.A.V. of BK Opportunities Fund-7 (Euro) as of the 30th of June 2023 after the distribution is 94.63%.
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BK Opportunities Fund-7 (Euro) updated performances are:
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June 2023 Monthly Return: 1.9%
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June 2023 Year-to-Date: 18.5%
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June 2023 Annual Return since inception1: 8.3%
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Cumulative Distributions since inception/October 2021: +7.0%
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Cumulative Return since inception/October 2021: +6.8%
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(1) Based on the weighted average internal rate of return (“IRR”) of all classes from their respective closing date at their respective entry price.
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Market Commentary & Portfolio Overview
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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 underlying issues are the war in Ukraine, high inflation, and rising interest rates lingering over the growth block.
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The Economy: ECB Less Determined on Inflation Containment
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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.
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Corporate Markets: Solid Performance
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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.
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Corporate Loans: Credit Cycle on Target
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The European trailing 12-month Leveraged Loan Default Rate by amount increased to 2.2% in June, according to 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 corporate 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.
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CLO Market: Slow Activity
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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.
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BK Opp. Fund 7: Performances
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This quarter, BK Opportunities Fund-7 is making a distribution of 3.0% (non-annualised, cash-on-cash). Payments will be wired on the 27th of July, 2023. The cumulative distribution of the fund is 7.4% (non-annualised, based on the weighted average distribution of all classes), and the annual return since inception is +8.27%. Under the current market environment, we continue to see attractive opportunities, and on top of the current distribution, we were able to reinvest part of the proceeds received. As we collect coupons & principal (and distribute or reinvest them) and trade around our positions, the fund’s performance should increase and reach a level closer to (and possibly above) our target return.
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Fund and Market Performances as of 30th June 2023
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Monthly Performances
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Vintage
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Fund’s Summary
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| Currency |
EUR |
| Fund’s Inception |
October 2021 |
| Distribution |
Quarterly |
| Investment Manager |
Oristan Ireland DAC |
| Administrator |
Apex Funds Services |
| Custodian |
CIBC Bank & Trust |
| Counsel |
Dillon Eustace |
| Auditor |
Deloitte |
| Bloomberg Page |
BKOPP7A KY |
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Portfolio Manager
Olivier Gozlan
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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.
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