BK Opportunities Fund 5 - Crystal Fund

BK Opportunities
Fund 5

Quarterly Report | 31 March 2022

BK Opportunities Fund-5 (Euro) will make its quarterly distribution to its investors for the 31st March 2022 quarter-end of 1.50% (cash on cash, non-annualized) of its capital contribution. Payments are wired on or around the 3rd of May 2022.

Furthermore, the N.A.V. of BK Opportunities Fund-5 (Euro) as of the 31st March 2021 after distribution is 94.30%.

BK Opportunities Fund-5 (Euro) updated performances are:
March 2022 Monthly Return (non-annualized): -0.7%
March 2022 Year-to-Date (non-annualized): -3.0%
March 2022 Annual Return since inception1: +8.3%
Cumulative Distributions since inception/July 20182: +33.0%
Cumulative Return since inception/July 20182 (Distributions + NAV gain): +27.3%
(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

Ukraine War

Since February, the war has hung news and business in Ukraine while the world was getting away from the Covid disruption. A widespread international embargo has cut Russia’s economy from most of the world. Many Russian assets are frozen, and many private companies are leaving Russian operations. The two significant impacts on the world economy are shortages in energy, mainly oil and gas, and commodities like Nikel or wheat. Energy shortages have an immediate impact on developed economies, mainly in Europe. On the commodity front, the impact is a more slow burn. The reaction was strong on the U.S. side and the E.U. The Biden Administration ordered record oil releases from the strategic reserve and invoked Cold War powers to encourage domestic production of critical minerals. The E.U. is coordinating to immediately reduce its reliance on Russian energy and possibly stop it completely. With no end in sight with the Ukrainian conflict, its impact on the global economy will continue from higher energy prices to a food shortage; Ukrain was producing 30% of the worldwide wheat export.

The Economy vs Inflation

The Ukraine conflict borders the E.U., and it shook the economy. From more than four million refugees fleeing armed conflict to the E.U. to its dependency on Russian oil and gas. The European Central Bank’s previous position, as told by Executive Board member Isabel Schnabel is “Continuing the path of policy normalization is, therefore, the appropriate course of action”. “The speed of normalization, in turn, will depend on the economic fallout from the war, the severity of the inflation shock. and its persistence.” The euro-area inflation rate hit yet another record in March, rising to 7.5% -- the highest level on record and more than triple the ECB’s 2% target. The war has added to the uncertainty about what aspects of this high inflation are transitory. It will vanish without action with the more permanent components as the Ukraine conflict is pushing prices higher for energy, commodities like Nickel and food. A combination of high inflation and recession is not to be excluded in the E.U. in the short term. Still, stagflation over a long period is unlikely as corporate solid balance sheets and recovering service sector activity, while the labour is picking up, should prevent a global recession this year. Part of the solution to this predicament will depend on the worldwide economy’s evolution in defence spending and acceleration of the move to green energy.

Corporate Loans: Update & activity

2022 has been volatile, from high expectations about moving on from Covid to the seismic shock of the war in Ukraine. The EURO STOXX 50, in early March, lost almost 19% from year-end because of the Ukrainian conflict before coming up, mid-April, to close to 9% lower than year-end. Corporates still suffer from the covid disorganized supply chain before being impacted by the Ukrain war externalities in terms of energy prices and commodity access. Credit returns have been shocking since the start of the year; according to the Credit Suisse Western European Leveraged Loan Index, average prices dipped by 3% since the beginning of the year before closing 1.6% lower than at year-end. Interestingly defaults are not a driver of return as they have been no high yield defaults, and the Leveraged Loan Default Rate is stable a 0.2%.

CLO: Update & Activity section

In parallel, CLO tranches secondary trading prices have dropped by several points at the beginning of the Ukrainian crisis, but have stabilized in this context since then. As primary market was subdued, market players with reinvestment capacity have increased participation in secondary activity. As usual in this environment, investment-grade tranches showed more consistency in trading than the more mezzanine tranche. This gave rise to trading opportunities, we were able to add attractive profiles to the BK Opportunities Fund-5 portfolio.

BK Opp. Fund 5
Performances

This quarter, BK Opportunities Fund‐5 is making a distribution of 1.50% to its investors. Payments are wired on the 29th April 2022. This brings the total distribution since inception at 33.00%, of the Capital Contribution. The cumulative return as of 31st March 2022, which blends distributions and NAV profits is 27.3% or 8.3% on an annual basis. We continue to monitor market flows and fundamentals and are constantly considering opportunities on both side of the trade (buy or sell).

Fund’s Summary

Currency EUR
Fund’s Inception August 2018
Last Closing October 2019
Maturity(5) October 2024
Distribution Quarterly(6)
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

Fund and Market Performances as of 31 March 2022

Capture d’écran 2022-03-05 à 00.01.16

Monthly Performances

Screenshot 2022-04-30 at 08.51.17

Distribution

Capture d’écran 2022-03-05 à 00.01.24

Cumulative and Quarterly Distribution

Capture d’écran 2022-03-05 à 00.01.34

Portfolio Manager
Olivier Gozlan


olivier.gozlan@crystalfund.com

+44 208 089 11 35
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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.