Investment Vehicle Manager Market & Portfolio Commentary – April 2019

30.04.2019

Global risk markets ended April in positive territory, seeing US equity markets reaching a fresh record high on stronger than anticipated Q1 earnings. Sentiment was also boosted by solid US economic indicators for the first three months of 2019, an easing of US-China trade concerns, signs that Chinese stimulus measures are working, and better than expected economic data coming out of Europe.

The pivot by central banks toward more accommodative monetary policy continued, with many leaning towards lower interest rates again, supporting risk sentiment through April.

European Sub Investment Grade Highlights*

April leverage issuance was €11.55bn, continuing to be short of issuance Last Year (“LY”) which was €16.13bn. Monthly volumes were €2.52bn in loans (€5.59bn LY) and €9.03bn (€10.54bn LY) in High Yield (“HY”).
2019 loan volumes have been 70% acquisition and 14% refinancing, with the balance being recaps. Euro denominated issuance comprised 96% of the volumes for the month, and GBP 4%.
2019 bond volumes have been 60% refinancing and 7% M&A, with the balance for general corporate purposes. Sources of funding were 33% secured, 66% unsecured and 1% subordinated bonds. Composition is 94% Euro with the balance being GBP.
TL B new issue spreads in April were E+401bps, which has been largely stable in 2019. April pricing was 44bps wider than the corresponding period LY. Average net leverage was stable at 5.6x, which was 0.3x higher than the corresponding period LY.
In the HY space, single B debt issued in the last 3 months to April 2019 was priced at 4.58% yield, compared to 5.45% for Q1 2018. For the BB space however the YTM on a rolling 3-month basis was 3.07%, c.90bps tighter than the new issue for Q4 2018, a flight to quality.

The Credit Suisse Western European HY Index hedged to Euro was up with a return of 1.52% for the month taking YTD to 6.98%. The Credit Suisse European Leveraged Loan Index hedged to Euro was up 0.98% for the month taking YTD to 3.02%.

Broadly the portfolio continued to allocate to the new issue market in performing credit, and focused on working through a number of single name processes in the credit opportunities portfolio. In addition, with the continued strength of the HY market, the portfolio took advantage of selling down positions which had rallied through 2019 and were trading tight to its historic levels.

As of April close, performing credit (including cash) holds a 61.0% allocation with a weighted average price of 99.8, trading at a YTM of 4.7%, delivering 4.7% cash yield to the portfolio. Credit opportunities maintained a 39.0% allocation to the strategy, closing the month at a weighted average price of 85.8, trading at a YTM of 10.7%, and delivering 7.0% cash yield to the portfolio.

At the end of April, floating rate instruments comprised 85.7% of the portfolio. The current yield is 6.4% (gross) with a weighted average market price of the portfolio of 93.9 versus 92.6 as at 31 March 2019. Cash position was 3.2%, down from 7.8% as at 31 March 2019.

* Sources: S&P LCD – May 2019

Important disclaimer and terms of use

These written materials are not for release, publication or distribution, directly or indirectly, in or into the United States, Australia, Canada, South Africa or Japan or to "U.S. persons" as defined in Regulation S under the US Securities Act ("US Persons"). The information contained herein does not constitute or form part of any offer or solicitation to purchase or subscribe for securities in the United States, Australia, Canada, South Africa or Japan or any other jurisdiction where to do so might constitute a violation of the relevant laws or regulations of such jurisdiction. The Company has not been and will not be registered under the US Investment Company Act of 1940, as amended (the "Investment Company Act") and, as such, holders of the Company’s securities will not be entitled to the benefits of the Investment Company Act. The securities discussed herein have not been and will not be registered under the US Securities Act of 1933, as amended (the "US Securities Act"), or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered or sold in the United States or to, or for the account or benefit of, US Persons absent registration or an exemption from registration under the US Securities Act in a manner that would not require the Company to register under the Investment Company Act. No public offering of securities will be made in the United States. No securities may be offered or sold, directly or indirectly, into the United States or to US Persons absent registration or an exemption from registration under the US Securities Act and in a manner that would not require the Company to register under the Investment Company Act.

In addition, in the United Kingdom, these materials on this website are only being distributed to and are only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (iii) high net worth entities, and other persons to whom they may lawfully be communicated, falling within Article 49(2)(a) to (e) of the Order (all such persons in (i), (ii) and (iii) above together being referred to as "relevant persons"). Securities to which the materials relate are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on the materials or any of their contents.

Any communication on this website is only addressed to and is only directed at persons in any member state of the European Economic Area ("EEA Member State") where any required notification or registration for "marketing" as that term is defined in Article 4(1)(x) of Directive 2011/61/EU on alternative investment fund managers ("AIFMD") has been made and who are both:

"qualified investors" in that Member State within the meaning of Article 2(e) of EU Prospectus Regulation (EU/2017/1129), as amended, including any relevant implementing measure in EEA Member State which has implemented the EU Prospectus Regulation; and

"professional investors" in that EEA Member State within the meaning of Article 4(1)(ag) AIFMD.

A list of EEA Member States in which a notification or registration has been made for marketing to professional investors under AIFMD is available on request.

This website should not be accessed by persons in any EEA Member State who are "retail investors" within the meaning of Article 4(1)(aj) of the AIFMD ("retail investors").

Access to electronic versions of these materials is being made available on the webpage in good faith and for information purposes only. Making press announcements and other documents relating to any offering of securities available in electronic format does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for securities, nor does it constitute a recommendation by any party to sell or buy securities.

By clicking on the "Accept" button, I confirm, represent, warrant and agree that:

I am not a US Person or located in the United States, Australia, Canada, South Africa or Japan or any other jurisdiction where to proceed to view the materials on this webpage would constitute a breach of securities law in that jurisdiction, and I confirm that I am permitted to view electronic versions of these materials; I will not forward, transmit or show the materials contained in this webpage to any US Person or person located in, or a resident of, the United States, Australia, Canada, South Africa or Japan or any other jurisdiction where it would be unlawful to do so; and I have read and understood the disclaimer set out above and will read carefully any additional disclaimers or important notices attaching to or forming part of the materials or information on this website. I understand that this may affect my rights, and I agree to be bound by their terms.

I am not a retail investor located in an EEA Member state.

News & Documents