Commentaries

Commentaries

5 September 2024

Strata Credit Monthly Comment - August 2024

August could be characterised as a month of two halves, risk sentiment feeble across the board in the first two weeks, followed by a wave of buying driven by dovish comments by Central Banks and by an encouraging earnings season. The part of August was met by the biggest volatility we’ve seen since Covid times in 2020. After a weak Manufacturing ISM last week followed by a low NFP print and record high unemployment rate, the macro picture got incredibly bleak on worries that recession was fast approaching as central banks might have waited too long to cut rates. We saw aggressive risk off moves with equities selling off -8% from recent highs, rates rallying and hitting new lows (2Y UST bottomed at 3.65% & DBR at 2.15%) while Cross-over widened by more than 60bps. However, the markets were quick to stabilise, recovering much of the damage incurred earlier, due to a more pragmatic Bank of Japan, which stated the pace of tightening will take into account markets, and by the fact that US data are not deteriorating as quick as markets feared in July. Importantly during the month Fed Chair Jerome Powell came with a rather dovish message at the global central banking conference at Jackson Hole. The central banker guided explicitly for a cut in September but added that size and depth of cuts depend on labour market weakness. The tone on the economy was overall worried, and Powell pointed out the Fed has ample policy space to respond to any unwarranted weakness.

During the month, the fund posted a positive performance with all asset classes posting a positive performance. We continue to see selected opportunities in credit but like to maintain a high degree of protection, as valuations remain tight and macro volatility is on the rise. The portfolio managers kept elevated levels of liquidity allowing flexibility in case of a spike of volatility. During the month, we deployed new capital into selected BBB issuers, with a bias towards European defensive issuers, and structured credit, particularly BBB CLOs. We continued looking for opportunities to reduce exposure to more cyclical single B corporates that we believe have become fairly valued.

Despite the uncertainty on global growth that still lies ahead, valuation looks attractive, with spreads at reasonable levels compared to historical averages and fundamentals remaining solid across sectors. We maintain our preference for bigger, stronger banks, selected defensive BB and BBB-rated corporates and BBB CLO tranches, yielding 7-8%,  as we consider them as an extremely attractive opportunity in the current market context. In aggregate, we believe the portfolio is well-positioned with a yield-to-worst over 7% in EUR, an average price in the mid-90s.

*Rating Provider: RAM AI. Date of rating as of the end of the month.

 

Important Information

Please note that the performance shown reflects periods before the Sub-Fund’s transfer and was achieved under different regulatory and operational conditions, which may no longer apply. Notwithstanding this, the performance is based on investment objectives and policies that have not materially changed following the sub-fund's transfer and is attributable to investment objectives, policies, restrictions, and strategies that are compliant with UCITS regulations. The investment management function remains consistent, with no changes to the team responsible for managing the fund after the transfer. Importantly, there has been no material change in the level of fees charged to investors as a result of this transfer. For further information, please refer to the Prospectus.

The Strata Credit Fund is a Sub-Fund of RAM (Lux) Tactical Funds II, a Luxembourg SICAV with registered office: 14, Boulevard Royal L-2449 Luxembourg, approved by the CSSF and constituting a UCITS (Directive 2009/65/EC). The sub-fund STRATA CREDIT FUND was been created in the RAM (LUX) Tactical Funds II SICAV to receive the PALLADIUM FCP – RAM Mediobanca Strata UCITS Credit Fund sub-fund. The transfer was effective on 30th May 2024.

Please note that the share classes mentioned in this document may not be registered in your country of domicile.

This marketing document is only provided for information purposes to professional clients, and it does not constitute an offer, investment advice or a solicitation to subscribe shares in any jurisdiction where such an offer or solicitation would not be authorised or it would be unlawful. In particular, the Funds are not offered for sale in the United States or its territories and possessions, nor to any US Person (citizens or residents of the United States of America).

This document is confidential and is intended only for the use of the person to whom it was delivered; it may not be reproduced or distributed.

There is no guarantee that the holdings shown will be held in the future. The investment described concerns the acquisition of shares in the Sub-Fund and not in a specific underlying asset.

Past performance is not a guide to current or future results. There is no guarantee to get back the full amount invested. The performance data do not take into account fees and expenses charged on subscription and redemption of shares nor any taxes that may be levied. As a subscription fee calculation example, if an investor invests EUR 1000 in a fund with a subscription fee of 5%, the investor will pay to his financial intermediary EUR 50.00 on the investment amount, resulting with a subscribed amount of EUR 950.00 in fund shares. In addition, potential account keeping costs (by investor’s custodian) may reduce the performance. Some shares in the Sub-Fund apply a performance fee. Leverage intensifies the risk of potential increased losses or returns.

The Management Company may decide to terminate the marketing arrangement in place in any given country in accordance with Article 93a of Directive 2009/65/EC.

Changes in exchange rates may cause the NAV per share in the investor's base currency to fluctuate.

Particular attention is paid to the contents of this document but no guarantee, warranty or representation, express or implied, is given to the accuracy, correctness or completeness thereof.

Prior to any transaction, clients should check whether it is suited to their personal situation, and analyse the specific risks incurred, especially financial, legal and tax risks, and consult professional advisers if necessary.

Please refer to the Key Investor Information Document and prospectus with special attention to the risk warnings before investing. This Sub-Fund is classified as art.6 SFDR. For further information on ESG, please refer to

https://www.ram-ai.com/en/regulatory-information and the relevant Sub-Fund webpage, section "Sustainability-related disclosures".

The prospectus, constitutive documents and financial reports are available in English and French while PRIIPs KID are available in the relevant local languages. These documents can be obtained, free of charge, from the SICAVs’ and Management Company’s head office and www.ram-ai.com, its representative and distributor in Switzerland, RAM Active Investments S.A. and the relevant local representatives in the distribution countries.

A summary of Investors’ rights is available on: https://www.ram-ai.com/en/regulatoryinformation

Issued in Switzerland by RAM Active Investments S.A. which is authorised and regulated in Switzerland by the Swiss Financial Market Supervisory Authority (FINMA). Issued in the European Union and the EEA by the authorised and  regulated Management Company, Mediobanca Management Company S.A. 2 Boulevard de la Foire, 1528, Luxembourg, Grand Duchy of Luxembourg.

The source of the above-mentioned information (except if stated otherwise) is RAM Active Investments and the date of reference is the date of this document.

Legal Disclaimer

This document has been drawn up for information purposes only. It is neither an offer nor an invitation to buy or sell the investment products mentioned herein and may not be interpreted as an investment advisory service. It is not intended to be distributed, published or used in a jurisdiction where such distribution, publication or use is prohibited, and is not intended for any person or entity to whom or to which it would be illegal to address such a document. In particular, the products mentioned herein are not offered for sale in the United States or its territories and possessions, nor to any US person (citizens or residents of the United States of America). The opinions expressed herein do not take into account each customer’s individual situation, objectives or needs. Customers should form their own opinion about any security or financial instrument mentioned in this document. Prior to any transaction, customers should check whether it is suited to their personal situation and analyse the specific risks incurred, especially financial, legal and tax risks, and consult professional advisers if necessary. The information and analyses contained in this document are based on sources deemed to be reliable. However, RAM AI Group cannot guarantee that said information and analyses are up-to-date, accurate or exhaustive, and accepts no liability for any loss or damage that may result from their use. All information and assessments are subject to change without notice. Investors are advised to base their decision whether or not to invest in fund units on the most recent reports and prospectuses. These contain further information on the products concerned. The value of units and income thereon may rise or fall and is in no way guaranteed. The price of the financial products mentioned in this document may fluctuate and drop both suddenly and sharply, and it is even possible that all money invested may be lost. If requested, RAM AI Group will provide customers with more detailed information on the risks attached to specific investments. Exchange rate variations may also cause the value of an investment to rise or fall. Whether real or simulated, past performance is not necessarily a reliable guide to future performance. The prospectus, key investor information document, articles of association and financial reports are available free of charge from the SICAVs’ and management company’s head offices, its representative and distributor in Switzerland, RAM Active Investments S.A., Geneva, and the funds’ representative in the country in which the funds are registered. This marketing document has not been approved by any financial Authority, it is confidential and its total or partial reproduction and distribution are prohibited. Issued in Switzerland by RAM Active Investments S.A. which is authorised and regulated in Switzerland by the Swiss Financial Market Supervisory Authority (FINMA). Issued in the European Union and the EEA by the authorised and regulated Management Company, Mediobanca Management Company SA, 2 Boulevard de la Foire 1528 Luxembourg, Grand Duchy of Luxembourg. The source of the above-mentioned information (except if stated otherwise) is RAM Active Investments SA and the date of reference is the date of this document, end of the previous month.