CVC.COM
=

News & Documents

Sign up to email alerts to get all the latest news and documents straight to your inbox

Sign Up

Investment Vehicle Manager Market & Portfolio Commentary - April 2021

21.05.2021

April was a fairly strong month for financial markets with major equity indices climbing to new all-time highs during the month. Commodities was one of the strongest asset classes during the month with, for example, oil and copper extending their Year to Date ("YTD") gains. Despite the strong performance for commodities, the fear of inflation and central banks hikes abated during the month as US Treasuries generated positive performance.

European Sub Investment Grade Highlights

Total loan issuance during the month of April was €12.4bn, compared to only €1bn in April 2020. The average new issue spread in April was E+373 (3.89% yield), in line with last month. YTD issuance now stands at €53.5bn, considerably more than the €27bn issuance we saw in the first four months of 2020. On the High Yield side, we saw €12.1bn of bond issuance during the month, bringing YTD issuance to €50.5bn.a

The Credit Suisse Western European Leveraged Loan Index, hedged to EUR, returned +0.43% for the month, which brings YTD returns to +2.16%. Cyclicals (+0.48%) outperformed defensives (+0.37%) marginally for the month, while CCCs (+0.89%) again outperformed BBs (+0.19%) and Bs (+0.43%). The average cash price on the index was 98.44, while the 3yr discount margin at the end of April was 416bps. The Credit Suisse Western European High Yield Index, hedged to EUR, returned +0.67% for the month, bringing cumulative YTD returns to 2.28%. The spread to worst on the index is now 370bps, the tightest level since April 2018.

April was another active month within the performing book, thematically marked by portfolio optimization and convexity enhancement. During the month we reduced and/or exited more than ten line items in an effort to further optimize our positioning while the broader market continued to tighten. These names were generally low-spread, convexity-constrained investments trading at levels in which we felt comfortable monetizing against the backdrop of a tightening performing market. A portion of this capital was re-deployed into two new primary market investments. One of these new names funded the recapitalization of a European live-commerce player, while the second new investment funded the buyout of a European Over-The-Counter (“OTC”) pure-play self-care platform. We feel that the performing book continues to be well-positioned for current income and capital appreciation. As of April close, performing credit (including cash) was 45.6% of the portfolio, trading at a weighted average price of 100.0 and a YTM of 4.3%, whilst delivering a 4.3% cash yield to the portfolio.

Similar to the performing book, during the month of April, the credit opportunities book was also defined by optimization and convexity enhancement. A combination of performing and credit opportunities sales helped us to fund trades that improve convexity, expand current income, and capture discount. In terms of sales, we de-risked our position in a Spanish real estate servicer ahead of forthcoming maturities within the capital structure. On the deployment side, we added three new names to the credit opportunities book during the month, while also adding risk in two existing positions – all of which are characterized by attractive risk-adjusted returns. Within the structured products market, we have seen very strong demand for Collateralized Loan Obligation ("CLO") mezzanine paper. We held an auction that demonstrated this robust appetite for mezzanine, and ultimately reduced certain positions into this strength. We also realised profit on a portion of a CLO equity position that was sourced at cheaper levels. As of April close, credit opportunities was 54.4% of the portfolio, trading at a weighted average price of 91.6 and a YTM of 9.2%, whilst delivering a 7.4% cash yield to the portfolio.

Across the entire portfolio, as of April month end, the weighted average market price was 95.1, trading at a YTM of 8.2%, and delivering 7.4% cash yield (on a levered basis) versus a weighted average price of 93.6, YTM of 7.0% and cash yield of 6.6% as of December 2020. Floating rate instruments comprised 79.3% of the portfolio. Senior Secured 79.4%. The portfolio had a cash position of 3.7% (including leverage) with leverage at 1.3x assets.

We continue to feel strongly about fund positioning with Q1 earnings underway, which thus far have confirmed an impressive recovery on the corporate side since the onset of the pandemic. Our strategy has proven effective against relevant indices, and through active idea generation coupled with prudent risk management, we feel that the fund is strongly positioned for current income and capital appreciation. We will continue to be diligent in optimizing the fund while maintaining a judicious approach in managing risk.

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:

  1. "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
  2. "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.