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30 April 2013
Serone Capital Management LLP, London Independent Financial Partners, Zrich Trinity Fund Services, Dublin ir@seronecapital.com
2% p.a. of monthly NAV, paid quarterly in arrears 20% subject to hurdle rate; paid annually 12-month Euribor + 150bps with high-water mark EUR or USD 50,000 Monthly at NAV with 25 days notice
250 230 210 190 170 150 130 110 90 Apr-09 Oct-08
ZHYBF A ML HY Index*
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Note: NAV and performance metrics are presented net of management and performance fees Note: The current portfolio manager began managing the fund in November 2008 * Merrill Lynch European High Yield Index (ticker HEAD): ex-financial, 3% constrained
EUR A 2013 2012 2011 2010 2009 2008 2007 2006 2005
YR / YTD 6.57% 10.75% -11.56% 15.54% 59.29% -49.69% -3.82% 6.40% 1.86%
Note: The A share class was closed to new investment in November 2008; the B share class accepts all new subscriptions; performance of previous portfolio manager can be provided upon request
* Exposure is equal to market value adjusted for margined derivatives. Derivatives are treated as fully funded. A security with negative/positive exposure is short/long risk.
MANAGER COMMENTARY
We are happy to report that the fund returned 2.49% (EUR A) and 2.36% (EUR B) in March while the benchmark ML European Corporate HY index (HEAD) returned 2.18% for the same period. Zenith outperformed the index with year-to-date returns of 6.57%, while the index returned 3.62%. Following a period of tough austerity, the authorities are starting to take a more relaxed stance, the ECB made a 25bp rate cut and committed to full allotment on their refinancing operations until the middle of 2014. For now, Economic fundamentals, growth and fiscal concerns have taken the backseat as central banks provide a market backstop for authorities to perhaps take a slightly more relaxed view on austerity. Ironically the bad (economic) news was good news for risky assets on the basis that it increases the probability of a policy response. During the month European high yield CDS (iTraxx Xover) tightened by 86bps closing the month at 400bps, while single Bs outperformed triple Cs returning 2.03% and 1.82% respectively. The funds average rating at the beginning of the month was single B+ and we continue to believe this is the sweet spot. In April we saw EUR 6 billion of new high yield issuance bringing the total YTD new issuance to EUR 33 billion, breaking the 2011 record. According to JPM, a wall of new money is flowing into European high yield with inflows of EUR 543m during April and EUR 2.9 billion (8.3% of AUM) since the beginning of the year. Given these market dynamics we dont expect a sell-off anytime soon. The strong performance is likely to attract further inflows over the next few weeks as we have found that historically, flows tend to chase returns. Not only is the fear from the Euro area crisis diminishing, but macro-economic growth expectations are also set far lower, leaving less opportunity for investors to be disappointed. European high yield is still trading wide to the US, we will continue to focus on the smaller more nimble issues where we see potential spread tightening on the back of specific credit improvement and primary market activity.
This document is issued by Serone Capital Management LLP, which is authorised and regulated in the United Kingdom by the Financial Services Authority. This document is provided to you for information purposes only and should not be used or considered as an offer or a solicitation to sell or buy the securities mentioned in it. Any decision by an investor to buy shares in IFPC Zenith High Yield Fund must be made solely on the basis of the information and terms contained in the IFPC Zenith High Yield Fund prospectus. Performance data of the fund is not based on audited financial data. Past performance may not necessarily be repeated and is no guarantee or projection of future results. Opinions expressed herein may not necessarily be shared by all employees or partners of Serone Capital Management LLP and are subject to change without notice. A commitment to the Fund should only be made by persons with professional experience of participating in such funds. We have classified you as a professional client or eligible Counterparty based on the information we have. This document is exempt from general restrictions in Section 21 of the Financial Services and Markets Act 2000 as it is aimed solely to persons to whom the document can legitimately be communicated. The securities referenced in this document have not been registered under the Securities Act of 1933 (the 1933 Act) or any other securities laws of any other U.S. jurisdiction. Such securities may not be sold or transferred to U.S. persons unless such sale or transfer is registered under the 1933 Act or exempt from such registration. This information does not constitute tax advice. Investors should consult their own independent advice with regard to their tax situation.
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