|
|
|
|
BK Opportunities
Fund 4
Quarterly Report | 30th September 2022
|
|
BK Opportunities Fund-4 is making a quarterly distribution to its investors for the 30th September 2022 quarter-end of 2.5% (cash on cash, non-annualized) of its capital contribution (in USD). Payments will be wired on the 4th of November, 2022.
|
Furthermore, the N.A.V. of BK Opportunities Fund-4 as of the 30th of September 2022, after the distribution, is 40.50% of its capital contribution (in USD).
|
|
BK Opportunities Fund-4 updated performances are:
|
|
September 2022 Monthly Return (non-annualized): -8.2%
|
|
September 2022 Year-to-Date Return (non-annualized): +2.3%
|
|
September 2022 Annual Return since inception(1): +5.6%
|
|
Cumulative Distributions since inception/Mar. 20172: 84.0%
|
Cumulative Return since inception/Mar. 2017 (Distributions + NAV gain)(1): +24.5%
|
|
(1) Based on the weighted average return of all classes since their respective closing date.
|
|
Market Commentary & Portfolio Overview
|
|
|
|
|
The political talk focuses on mid-term elections where Democrats fight to keep the Senate majority. Even if the US GDP has rebounded into positive territory, the stock market is bearish, consumption is still strong, and unemployment is historically low. While not rosy, we still expect the monetization value of BK Opp. Fund-4 remaining positions to exceed current valuations.
|
|
|
|
|
|
|
The Economy: Fed Dual Mandate
|
|
The corporate sector is unhappy with the expected increases in the cost of borrowing. The risk is that if interest rates are too high, it could trigger a recession due to the inability of the private sector to invest. On the other hand, the annual inflation rate of 8.2% in September is uncomfortably high for the US Federal Reserve. The Fed has a dual mandate for price stability and full employment. The September Unemployment rate is 3.5%, which is extremely low by historical standards. So from the Fed's perspective, inflation needs to be lowered while employment is currently healthy. This is why the Fed policymakers have increased its base interest rate this week for the fourth time, bringing the policy rate to 3.75%-4% as part of the sharpest set of rate increases in about 40 years.
|
|
|
|
|
|
|
Corporate Markets: Under Pressure
|
|
The US economy posted its first period of positive growth for 2022 of 2.6% in the third quarter, at least temporarily easing recession fears, the Bureau of Economic Analysis reported on October 27th. Corporate credit conditions remain under stress and could worsen further amid the US economic slump and the rise in interest rates. Given the continuing geopolitical tensions, talks about a recession are gathering support. The long-running issue is that the end of free money is hurting margins. So inefficient companies will have significant difficulties, simultaneously allowing corporations with sound business to show themselves.
|
|
|
|
|
|
|
Corporate Loans
|
|
As expected, the tighter economic environment combined with the fading covid pause led in September to the S&P/LSTA default rate increasing to 0.9% by issuer number and only 0.85% by principal amount. It is the highest level for loan default rates since June 2021, but it is still well below the ten-year average of 2%.
|
|
|
|
|
|
|
CLO Market
|
|
The CLO new issue market saw some activity this quarter, but the limited demand has pushed the discount margin for the BB and single B tranches wider. The secondary market also saw a very high level of activity. As loan prices decreased, lower tranches of CLO transactions had lower credit enhancement, as reflected in the valuations. However, BK Opp. Fund-4 positions were selected based on their robustness (among other parameters), therefore, they can resist distress scenarios.
|
|
|
|
BK Opp. Fund 4
|
|
BK Opp. Fund-4 is making a distribution of 2.50% ($25.00 per share) this quarter (payments are being wired on the 3rd of November 2022), bringing the total distribution since inception at 84.00% ($840.00 per share) non-annualized. The cumulative return as of 30th September 2022, which blends distribution and NAV profits, is +24.5%. 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 +5.6% (all returns are net). As BK Opp. Fund-4 entered its amortization period last year, we are now focusing on monetising the remaining positions.
|
|
|
|
|
|
|
|
Quarterly Summary
|
|
|
|
|
|
Fund and Market Performances as of 30th September 2022
|
|
|
|
|
Monthly Performances
|
|
|
|
|
Cumulative and Quarterly Distribution
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
|
|