Signet Butler FFF European High Yield Fund


Investment Objectives

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.

Credit Selection

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.

Risk Management

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.

December 31, 2018 Update

NAV 123.1955 · MTD -1.21%  · YTD -2.13%

From the 26th November to the 31st December 2018, the Signet Butler FFF European High Yield Fund returned -1.21% net, underperforming the iBoxx Eur Liquid High Yield index by 0.33% over the period. Year-to-date, the performance is -2.13% net and the outperformance against the index is 1.23%. During the period the market correction continued, and only a few bonds were higher for idiosyncratic reasons. Top performers were CBR (German Retail, +2.9pts), Altice (French Telco, +0.1pts), and Balta (Belgium consumer products, +0.1pts). Worst performers were Klockner Pentaplast, (German Packaging, -21pts, now exited), Loewen Play (German gaming, -8.5pts) and Albea (French Packaging, -7.4pts). There was no sign of relief during the period, as shown by violent price action on Equity Markets (S&P capitulation on the 24th of December), prompting us to keep market exposure close to the lower bounds. During the first week of January, strong US data easing short term recessions fears as well as dovish comments from Jerome Powell, paved the way for a rally in risky assets and led us to significantly increase market exposure and benefit from positive price action that followed thereafter.

 

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Fund Identification

ISIN: IE00B9HJT617

Bloomberg: SIGEHYA ID Equity

Telekurs: N.A.

Sedol: B9HJT61

Sub-Investment Manager

Butler Investment Managers Ltd.