BK Opportunities Fund 4 - Crystal Fund

BK Opportunities
Fund 4

Quarterly Report | 30th June 2022

BK Opportunities Fund-4 is making a quarterly distribution to its investors for the 30th June 2022 quarter-end of 7.5% (cash on cash, non-annualized) of its capital contribution (in USD). Payments will be wired on the 4th of August 2022.

Furthermore, the N.A.V. of BK Opportunities Fund-4 as of the 30th June 2022, after the distribution is 43.08% of its capital contribution (in USD).

BK Opportunities Fund-4 updated performances are:
June 2022 Monthly Return (non-annualized): -5.5%
June 2022 Year-to-Date Return (non-annualized): +2.5%
June 2022 Annual Return since inception(1): +5.8%
Cumulative Distributions since inception/Mar. 20172: 81.5%
Cumulative Return since inception/Mar. 2017 (Distributions + NAV gain)(1): +24.6%

(1) Based on the weighted average return of all classes since their respective closing date.

Market Commentary & Portfolio Overview

Political events seem to take more importance, as illustrated by the war in Ukraine. This is in this uncertain environment that businesses are navigating, but we expect to be able to steer through those unsettled times toward new opportunities.

The Economy: Fasten your seat belt!

The Federal Open Market Committee (FOMC) unanimously decided to raise the target range for the federal funds rate to 1.50 to 1.75 in June and now to 2.25% to 2.50% in July. With an annual inflation rate of 9.1% in June, at the highest in forty years, further rate hikes look inevitable. The usual argument is to raise interest rates fast enough to tame inflation but not too fast to kill a recovery, a real balancing act. Another important data is the future price of oil, further supply disruption due to the Ukraine war could push prices to $135 per barrel, as Goldman forecasts. At the same time, a depressed economy would bring back prices to $45, as Citi forecasts. In this case, oil prices would directly result from the state of the world economy (and not the opposite).

Corporate Markets: Creative Destruction

While the economy is slowing down, the US has now entered a recession as semantically defined by (most as) 2 consecutive quarters of negative GDP growth – Q1 2022 was -1.6% and Q2 2022 was -0.9%. As a direct result of supply disruption and interest rate increase, the corporate environment is getting less favourable. After a long period of cheap money and good trading conditions, Corporates’ margins will now be hurt. So we are expecting an increase in defaults following the current market repricing. It will create some short-end pain but also cleanse the economy of underperforming companies allowing for better performance in the medium range. One of the very few positives of the Covid pandemic has been to force corporations across the board to strengthen their balance sheet to cope with the pandemic. Corporations still enjoy a low-interest rate agreed upon two years ago that should last, on average, another 2 to 3 years. As of today, balance sheets are still healthy and able to cope with worse market conditions.

Corporate Loans: Opportunities

As a result of the complex environment, corporate debt issuance is 34% lower than last year. In June, the S&P/LSTA default rate was 0.43% by issuer number and only 0.28% by principal amount. S&P research published that the S&P/LSTA Leveraged Loan Index Default Rate Could Rise to 1.75% By March 2023. Overall the corporate loan situation will worsen, but it should stay manageable and allow us to use our skills to pick up valuable CLO tranche at lower prices, with a very strong resilience level.

BK Opp. Fund 4

BK Opp. Fund-4 is making a distribution of 7.50% ($75.00 per share) this quarter (payments are being wired on the 5th of August 2022), bringing the total distribution since inception at 81.50% ($815.00 per share) non-annualized. The cumulative return as of 30th June 2022, which blends distribution and NAV profits, is +24.6%. 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 +5.8% (all returns are net). We are now focusing on monetising the remaining positions, which should increase the fund’s performances.

Quarterly Summary

Screenshot 2022-08-03 at 21.51.33

Fund and Market Performances as of 30th June 2022

Screenshot 2022-08-03 at 21.57.29

Monthly Performances

Screenshot 2022-08-03 at 21.56.00

Cumulative and Quarterly Distribution

Screenshot 2022-08-03 at 21.56.39

Fund’s Summary

Currency USD
Fund’s Inception April 2017
Last Closing July 2018
Maturity5 July 2023
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.