BK Opportunities Fund 5 - Crystal Fund

BK Opportunities
Fund 5

Quarterly Report | 31st December 2023

BK Opportunities Fund-5 (Euro) will make its quarterly distribution to its investors for the 31st December 2023 of 9.25% (cash on cash, non-annualized) of its capital contribution. Payments will be wired on the 29th of January, 2024.

Furthermore, the N.A.V. of BK Opportunities Fund-5 (Euro) as of the 31st of December 2023 after the distribution is 68.84%.

BK Opportunities Fund-5 (Euro) updated performances are:
December 2023 Monthly Return (non-annualized): 4.2%
December 2023 Year-to-Date (non-annualized): 37.2%
December 2023 Annual Return since inception1: +8.0%
Cumulative Distributions since inception/July 20182: +70.0%
Cumulative Return since inception/July 20182 (Distributions + NAV gain): +38.8%
(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

Speaking last week in Davos, ECB President Christine Lagarde, when asked about a summer rate cut, Lagarde described the prospect as “likely.” While a warning of the high uncertainty followed her comment, this has been interpreted as a clear indication of intent. This comment has been a sharp change of message as European Central Bank officials have been wary of even discussing interest-rate cuts until now.

The Economy: Standing Firm

The Eurozone's annual consumer inflation in December stood at 2.9%. This marked an increase from the previous month's over 2-year low of 2.4%, as indicated by Eurostat data. The increase was mainly due to a significant rebound in energy inflation in Germany after the end of one-off subsidies. The Eurozone economy contracted by 0.1% during the third quarter of 2023. It was the first decline in GDP volumes since the final quarter of 2022, primarily attributed to a negative contribution of 0.3 percentage points from inventory changes. The Unemployment rate was 6.5% in Q3 2023, unchanged from Q2. The stability of the European economy without immediate expected downside, coupled with the fact that inflation is getting close to the ECB target rate of 2%, explains Largarde's stand on the rate.

Corporate Markets: Gain potential

The STOXX Europe 600 Index was up 12.74% for 2023. Anticipated interest rate cuts are currently lifting European stocks. There is a potential market downturn risk if optimism wanes. Despite the unfavorable macroeconomic outlook, European stocks are comparatively undervalued historically and internationally, indicating the possibility of share price gains in 2024.

Corporate Loans: Improvements and Challenges

In Q3 2023, total volumes of €15,057m marked a 29.8% decrease from Q2 2023 (€21,231m) and an 18.73% decline from Q3 2022 (€18,527m). Leveraged loan trades in Western Europe accounted for 82.66%, a decrease from the previous quarter but an increase from Q3 2022. The European loan market concluded 2023 on a strong note, with the Morningstar European Leveraged Loan Index (ELLI) returning 1.21% in December, driven by robust CLO demand and improved market sentiment. The ELLI's average bid price increased by 42 basis points to close at 96.02. Despite posting a full-year return of -13.42%, the ELLI emerged as the best-performing asset class in Europe for the year. Single-Bs outperformed other rating cohorts both monthly and yearly. Opportunistic deals drove primary market supply, with total institutional volume decreasing to €1.6 billion.

CLO Market: Market Resilience in 2023

The year-end seasonal slowdown contributed to a decrease in CLO issuance, with total volume reaching €0.8 billion for the month of December but remaining resilient at €26.2 billion for the year. The ELLI experienced one default (Wittur), causing the trailing 12-month default rate to increase from 1.42% in November to 1.62%. Senior and junior over-collateralization (OC) test cushions for reinvesting CLOs increased, with senior cushions averaging 9.1% and junior cushions at 4.1%, up from 8.8% and 3.8%, respectively, in the previous quarter.

BK Opp. Fund 5: Performances

This quarter, BK Opportunities Fund-5 is making a distribution of 9.25% to its investors. Payments will be wired on or around the 29th of January, 2024—the total distribution since inception at 70.00% of the Capital Contribution. The cumulative return as of 31 December 2024, which blends distributions and NAV profits, is 38.8% or 8.0% on an annual basis, well higher than most tradable indexes over the same period, such as the Corporate Loan index (4.0%) and the Euro Stox 600 (4.3%). 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 fund is now in its amortization mode, so from now on, all distributions and proceeds will be distributed, and we also focus on monetizing the positions.

Fund and Market Performances as of 31st December 2023

Monthly Performances

Cumulative and Quarterly Distribution

Fund's Statistics

Top 10 Industry Exposure

Industry % of Portfolio
Diversified Telecommunication Services 8.9%
Health Care Providers & Services 8.4%
Chemicals 6.8%
Building Products 6.8%
Media 6.2%
Hotels, Restaurants & Leisure 5.5%
Diversified Consumer Services 5.1%
Pharmaceuticals 4.4%
Containers & Packaging 3.3%
Machinery 3.2%

Top 10 Issuers Exposure

Issuer % of Portfolio
Liberty Global Plc 2.3%
Ineos Limited 2.2%
Altice NV 1.9%
Verisure Midholding AB 1.5%
Lorca Jvco Limited 1.2%
WS Audiology A/S 1.1%
Techem Verwaltungsgesellschaft 671 MMBH 1.1%
Nidda German Topco Gmbh 1.1%
Quimper AB 1.0%
Eircom Holding Ireland Ltd 0.9%

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.