Leading fund

Frankfurt-based Lupus Alpha took the two top performing spots in June, returning 24.8% and 22.77% for Lupus Alpha CLO Opportunity Notes I and II. Annualised returns since inception for these funds have reached 11.65% and 3.47% respectively.

After deploying into single B notes in early May, the Lupus Alpha team focused on low priced equity notes. These tranches were boosted by increasing over-collateralisation ratios.

“We’ve been investing in attractive deals (short equity) already refinanced or reset,” says Michael Hombach, portfolio manager at Lupus Alpha. “Their low capital cost, high junior OC cushion at 2-4% and strong underlying valuation have helped them outperform counterparts. Now we are seeing an equity driven revaluation in the market. This has helped keep the notes attractive.”

Top performers in June (%)

Lupus Alpha CLO Opportunity Notes I

Lupus Alpha CLO Opportunity Notes I vs CLOs Index cumulative returns (%)

Some CLO funds have benefited from single-B tranche exposure in April and the improvement in CLO equity valuations now that OC test failures appear to have plateaued. However, of the top 10, only one fund has positive year to date returns. Napier Park European Credit Opportunities Fund posted a YTD figure of 8.33%.

Serone, III and Wasserstein all stood out as non-CLO funds: they are from the structured finance and US high yield categories. This is the second month the III Credit Opportunities Fund has made the top 10, as it returned 17.05% in May and 11.78% in June, pushing YTD performance to -14.00%.

June returns have once again been led by CLO funds, as seven out of the top 10 belong to our CLOs category. The bounce back from the slump in March continued as 96% of funds in the database made positive returns, keeping up the momentum from May, when 97% were positive.