CVC Credit Partners European Opportunities (CCPEOL) has achieved a total NAV return loss of 4% (it targets an 8% return) in the last 12 months, affected by market turbulence. CCPEOL has a significant weighting to stressed assets in its portfolio. Although credit markets have rebounded from the March lows, the performing credit segment is still trading at historically low valuations. The manager sees the greatest opportunity in the upper CCC and lower B segments and in structured finance. As such, although the manager expects the markets to remain volatile, it has positioned its portfolio towards the more opportunistic spectrum of the credit market.
CCPEOL offers investors daily traded exposure to a diversified portfolio of subinvestment grade debt, with facilities providing liquidity to investors and a buyback strategy limiting the discount to NAV. The portfolio is split into two pools: performing credit and credit opportunities. The investment manager has shifted the weight towards the latter because of market dislocation. It is a segment the manager knows well, can leverage its restructuring expertise and believes that in the next 12–18 months can deliver returns above the 8% plus target.
- Investment manager has 15 years’ experience.
- Debt specialist with relatively unconstrained mandate, thus able to invest in situations where technicals diverge from fundamentals.
- Current depressed valuations in credit opportunities allow manager (CVC European Credit Opportunities, CEC) to invest at an above-average YTM.
Both CCPEOL’s share classes have traded close to NAV since the fund launched in 2013 due to share conversion facilities, active trading in treasury shares and the quarterly tender facility (subject to a specified limit). Market turbulence has resulted in higher discounts and recently climbed to a significant 10%. The recent dividend reduction due to market volatility results in a dividend yield of 4.6–5.0%.