Strata Credit Monthly Comment - September 2024 [en anglais uniquement]

Credit markets keep performing well as growing optimism about a soft landing and the synchronised easing action of major global central banks pushed European spreads tighter. After keeping rates on hold for 14 months, the Fed finally reversed course and delivered a 50bp cut in September, lowering the fed funds target to the 4.75-5.00% range. The Fed’s decision is adding to the global synchronicity of this monetary policy easing, as many of the world central banks are now cutting rates again. In particular, Chinese authorities are ramping up stimulus at the strongest pace since late 2022. The PBOC has cut multiple interest rates and injected 1tn Yuan in the local markets. The government has also announced housing market support and injected new capital in state banks. The Communist party has signalled fiscal stimulus coming the second half of October and ledged for explicit coordination between monetary and fiscal policy. Noticeably, it’s early days in this cycle of financial easing, but so far, we believe we are in the benign scenario where stimulus are arriving outside of a recession. Historically, that has been a very good signal for credit as easing financial conditions should drive default rates lower in the coming quarters.

Higher quality portions of the credit market marginally outperformed. We continue to see selected opportunities in credit but like to maintain a high degree of protection, to shield performance for potential macro vol. We keep elevated levels of liquidity allowing flexibility in case of a spike of volatility. During the recent months we deployed new capital into selected BB new issues, with a bias towards European defensive issuers, and structured credit, particularly short dated 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 compelling, 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 (or 8% in USD), 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.

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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.

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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.