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 – March 2019

05.05.2020

The month of March was dominated by the spreading of the Covid-19 virus to Europe and the US. This, in combination with a Saudi-Russia price war on oil, sent risk assets tumbling. At the beginning of the month, the number of non-China Coronavirus cases stood at 4,600 while at the end of the month, there were over 700,000 confirmed cases outside China. The S&P 500 was down -12.4% on a total return basis, but equity indices in Southern Europe were even worse at -22.4% for Italy's FTSE MIB and -22.1% for Spain's IBEX.

The market experienced large price moves across a wide selection of credit instruments. Some were down 20-30 points regardless of rating, industry or priority ranking in the capital structure, and it appeared that there was indiscriminate de-risking across loans and High Yield ("HY") as the market sought liquidity at any price. As the global central bank actions and stimulus packages became reality, some technical pressure subsided resulting in recovery in parts of the higher-rated spectrum of the credit universe.

The Credit Suisse Western European Leveraged Loan Index, hedged to Euro, was down -13.57% for the month with the average loan price dropping from 97.29 at the end of February to 83.64 at the end of March. This is the lowest level since Q4 2011 in the middle of the Euro crisis. The Credit Suisse Western European High Yield Index, hedged to Euro, was down -13.66% for the month.

Given the market environment through March, risk management was a challenge whilst navigating minute-by-minute updates on the impact of Covid-19 across Europe and into the US, including (i) global growth outlooks changing as economies shut down, (ii) corporate fundamentals shifting, driving dramatic flows across risk assets, and (iii) a stream of government and central bank policy actions to support liquidity which was breaking down.

Across the performing credit book, portfolio management focused on (i) reducing risk in the hardest-hit sectors of leisure, entertainment, retail and travel, (ii) reducing exposure to Italy, and (iii) consciously retaining cash whilst rotating into defensive sectors within technology, media & telecoms and food retailer/grocers, a

Floating rate instruments comprised 87.6% of the portfolio. Senior Secured 73.4%. The current yield is 7.1% (gross) with a weighted average market price of the portfolio of 77.0 as at 31st March 2020. The cash position was at 17.9% compared to 13.2% as of the start of the year.

In the current environment, we believe that the opportunity sits squarely in the credit opportunities strategy which is anticipated to provide a deep pool of investable assets in the coming months as (i) the fundamentals or impact of Covid-19 shut-downs on levered corporate balance sheets materialise, (ii) dislocations persist as higher rated and lower rated credit continues to bifurcate, and (iii) the new issue market re-opens at attractive relative yields.

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.