Net Asset Value(s)

Fair Oaks AAA CLO Fund, a sub‑fund of Alpha UCITS SICAV, reports NAVs as of 27/01/2026: UCITS ETF GBP Hedged Acc. (ISIN LU2825557270) NAV 10.5337 GBP with 101,822.00 shares outstanding, and UCITS ETF EUR Dist. (ISIN LU2785470191) NAV 1,018.16 EUR with 29,927.00 shares outstanding. The sub‑fund’s total net assets are EUR 129,811,069.24.

Analysis

Market structure: AAA CLO tranche investors (capital-preservation yield seekers, CLO managers, and balance-sheet arbitrage desks) are the direct winners as these tranches offer spread pick-up vs sovereigns/IG with structural credit protection; leveraged high‑yield and unsecured creditors are relatively disadvantaged if funds rotate into senior CLO paper. The fund is modest (~€130m) so incremental flows can move secondary CLO spreads; the existence of GBP‑hedged and EUR distribution share classes signals active FX positioning demand and potential cross‑currency flow differentials into CLOs.

Risk assessment: Key tail risks are regulatory repricing (EU/UK product rule changes or risk retention enforcement), CLO manager underperformance and forced selling/liquidity mismatch on redemptions; model a 50–200bp AAA spread widening in an adverse recession over 3–12 months leading to NAV volatility >8%. Immediate (days) risk is liquidity; short term (weeks–months) is spread volatility tied to loan default signals and central bank action; long term (quarters) is cumulative default loss and structural waterfall erosion.

Trade implications: Direct play: use the EUR distribution share (ISIN LU2785470191) for euro investors or LU2825557270 GBP‑hedged for sterling investors — consider a tactical 2–3% portfolio allocation held 12–24 months, trim if NAV drops >8% or AAA spread compresses by >50bps. Hedged pair: long the CLO fund (2%) vs short LQD (1%) to neutralize broad IG beta or vs short HYG (0.5–1%) to hedge HY beta; buy 6‑month HYG 7.5% OTM puts as a cheap tail hedge if spreads widen >75bps.

Contrarian angles: Consensus treats AAA CLOs as “safe” IG proxies but underestimates liquidity and structural waterfall risk in stress — small fund size magnifies fire‑sale risk. Historical parallel: 2020 CLO dislocations where AAA tranches moved materially; consider buy‑on‑weakness rule: accumulate up to 4% exposure if AAA spread widens >100bps and trim on >50bps compression or regulatory tightening announcements.

Key Decisions for Investors

• Establish a tactical 2–3% position in the EUR distribution share of ALPHA UCITS‑FAIR OAKS AAA CLO FUND (ISIN LU2785470191) for euro portfolios, hold 12–24 months; exit/trim if NAV falls >8% or AAA spreads compress >50bps.
• Sterling investors: prefer LU2825557270 (GBP Hedged Acc.) and limit exposure to 2% given hedging costs; sell if GBP moves >1.5% adverse to base currency over 3 months relative to carry expectations.
• Implement a hedged pair: long 2% CLO fund vs short 1% iShares iBoxx Investment Grade Corporate Bond ETF (LQD) to neutralize IG beta, or vs short HYG 0.5–1% to hedge HY beta; rebalance if relative spread moves >30bps.
• Buy 6‑month puts on HYG (approx 7–10% OTM) sized to cover 50% of position mark‑to‑market risk as a tail hedge; if HYG widens >75bps, add another 1% to CLO exposure up to 4%.
• Set monitoring triggers: track AAA CLO vs 5y Bund spread and loan delinquency rate weekly; initiate buys when AAA–Bund spread widens >100bps or loan 90+ day delinquencies stay <2% for 3 consecutive months.