European High Yield Bond Portfolio (EHYBP)
The economic storm in Europe has increased volatility in the region’s credit markets, and magnified the divergence intra sector within local markets. The European high yield space is a smaller but faster growing market than in the US, increasing at over 25% per year in volume terms, which creates a more diversified universe. This growth has also created mispricing opportunities in individual credits that are not well understood by market participants.
Fundamental and market-based selection approach through proprietary research and deep understanding of the European markets. The experienced Butler team is solely dedicated to this niche space and has a real edge in this market where less than 50% of the outstanding issuance is covered by brokerage research. In order to understand a company’s idiosyncratic risk, an investor must also have an intricate understanding of the local laws, covenants, cultural differences, history of management teams, corporate governance and colour on other market participants. These are areas in which Butler have the ability to add real value to managing portfolios of fixed income instruments.
This team believes that the opportunity lies in both bottom up-fundamental credit picking as well as taming volatility throughout the cycles. This portfolio will be long bias with risk actively managed via cash, credit and duration allocation as well as tail hedges. The team’s philosophy is to manage market exposure through active trading and portfolio repositioning.
September 30, 2018 Update
NAV 127.2371 · MTD 0.25% · YTD 1.08%
From the 27th August 2018 to the 24th September 2018, the European High Yield Bond Portfolio returned 0.25% net, outperforming the iBoxx Eur Liquid High Yield index by 0.05% over the period. Year-to-date, the performance is 1.08% net and the outperformance against the index is 0.77%. Top performers were Casino (French Retail, +6.8pts), Lecta (Italian Packaging, +2.0pts) and Verisure (Swedish consumer services, +1.7pts), worst performers were to be found within last month’s best performers, Klockner Pentaplast (German Packaging, -6.2pts) and New Look (UK Retail, -4.7pts), except CMC (Italian Construction, -11.9pts now exited). Market participants, obviously reluctantly long (high cash balances and continuing inflows), grew increasingly risk-averse in picking individual names. Primary was somewhat disappointing in terms of size and premium which led market participants to invest in the secondary market, which remained technically strong while European Equity markets trended more sideways, especially with Brexit and Italian Budget headlines. Overall, our exposure has remained stable versus last month, i.e. slightly below market exposure, while we wait for more clarity regarding Italian Budget (termsheet due by 10th October) before reassessing it.
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|Key Investor Information Document (KIID)||Download|
|Supplement to the prospectus||Download|
|Supplemental disclosure form and declaration for U.S. persons||Download|
|Latest interim financial statements||Download|
|UCITS Financial Audit 2017||Download|
Bloomberg: SIGEHYA ID Equity
Butler Investment Managers Ltd.