CVC Credit Partners European Opportunities (CCPEOL) achieved an NAV return of 3.1% in sterling and 1.6% in euro terms in FY19. The investment vehicle through which CCPEOL invests achieved a gross return of 2.9% (in euro terms), behind its target of 8–10% per year. This was largely due to several restructuring processes within the credit opportunities pool taking longer than expected. However, these have shown good progress recently and, together with prospective new credit investment opportunities, now offer further upside potential for 2020. Meanwhile, the performing credit holdings delivered solid returns as the investment manager was able to profit from the recent ‘flight to quality’ in credit markets.
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. Whereas in the latter pool CCPEOL was focused on turnaround processes in existing investments in 2019, the investment manager is likely to source new stressed assets in 2020 to leverage its restructuring expertise. At the same time, it offers exposure to high-quality and highly liquid investments in the performing credit part of the portfolio.
◼ Investment manager has 15 years’ experience.
◼ Debt specialist with relatively un-constrained mandate, able to invest in situations where technicals diverge from fundamentals.
◼ Current depressed valuations in credit opportunities allow the investment manager (CVC European Credit Opportunities, CEC) to invest at an aboveaverage YTM.
On average, both CCPEOL share classes have traded close to NAV since the fund was launched in June 2013. This is due to share conversion facilities, active trading in treasury shares and the quarterly tender facility. Recent market downturn due to coronavirus outbreak has brought the discount to a record-high 10.1% (including income).