Net Asset Value(s)

Fair Oaks AAA CLO Fund, a sub‑fund of Alpha UCITS SICAV, reported class‑level NAVs as of 15/01/2026: UCITS ETF GBP Hedged Acc. (ISIN LU2825557270) with NAV 10.5141 GBP and 101,822.00 shares outstanding, and UCITS ETF EUR Dist. (ISIN LU2785470191) with NAV 1,016.74 EUR and 29,927.00 shares outstanding. Both classes reference a fund total net asset value of EUR 132,518,482.20; the notice provides NAV, share count, currency and ISIN for investor records and valuation purposes.

Analysis

Market structure: The Fair Oaks AAA CLO fund (total AUM ~€132.5m across ISINs LU2785470191 and LU2825557270) sits in the senior tranche sleeve of the levered loan/CLO capital structure, so primary winners are yield-seeking credit buyers chasing AAA CLO carry vs core IG; losers are unhedged cash/liquidity providers when spreads widen. Supply/demand is driven by new CLO issuance and bank loan origination — if issuance stays subdued while buy-side demand for senior, asset‑backed yield stays, AAA spreads should compress 25–75bp over 1–6 months. Cross-asset: AAA CLO moves correlate positively with loan ETF volatility (BKLN) and inversely with core rates; FX hedging (GBP-hedged share class) introduces a carry drag that will outperform/underperform by the hedging cost spread vs Euribor/SONIA.

Risk assessment: Tail risks include regulatory tightening (EU/UK UCITS or bank capital rules) that could reprice CLO tranche liquidity, waterfall deterioration in a recession causing convective mark‑to‑market losses, and concentrated fund-level liquidity mismatches given modest AUM. Immediate (days) risks are FX hedge roll costs and fund flows; short-term (weeks–months) are spread volatility tied to macro data; long-term (quarters–years) are credit-cycle driven default/waterfall stress. Hidden dependencies: exposure to leveraged loan covenants and CLO manager reinvestment windows; secondary effects include bank funding spreads and repo haircuts. Catalysts: large CLO issuance calendar, central bank rate moves, or a regulatory announcement within 30–90 days.

Trade implications: Direct: consider a modest long in the EUR distribution share (ISIN LU2785470191) for carry if AAA spread vs Euribor >75bp and liquidity cost <0.25%/ann. Relative: pair long AAA CLO (LU2785470191) vs short BKLN to capture downside protection in idiosyncratic loan stress; size 0.5–1% notional of portfolio, hedge ratio 1:1 by DV01. Options/hedge: buy 3‑month OTM protection via CDX HY/IG or HYG 2.5% OTM puts to limit tail risk to ~1–2% premium. Timing: enter within 2–6 weeks if CLO supply remains muted and EUR swap spread stays >20bp above 6‑month average; trim on >50bp spread compression or fund inflows that double AUM.

Contrarian angles: The market underestimates liquidity risk in smaller UCITS CLO wrappers — upside from carry may be overstated if AUM growth lags, forcing wider bid‑ask on exits. Reaction may be underdone: in modest stress AAA tranches have historically outperformed loans and HY (2016–19), so buying senior CLO exposure ahead of expected loan defaults could be rewarded. Unintended consequences: regulation or rating agency methodology change could reclassify risk buckets within 30–120 days, causing sudden repricing; pricing inefficiency exists between small UCITS CLOs and larger institutional CLO tranches that active managers can exploit.

Key Decisions for Investors

• Establish a 2–3% portfolio position in Alpha UCITS‑Fair Oaks AAA CLO Fund EUR Dist (ISIN LU2785470191) within 2–6 weeks if AAA spread vs Euribor ≥75bp and fund liquidity remains stable; set a hard stop at 3% NAV drawdown and a profit trim at 50–75bp spread compression.
• Implement a relative value pair: long LU2785470191 (0.75% portfolio) and short Invesco Senior Loan ETF BKLN (0.75%) to capture senior tranche downside protection; rebalance monthly and widen hedge to 1:1.25 if BKLN volatility rises >30% vs 3‑month average.
• Buy downside protection: allocate 1% portfolio to CDX HY 3‑month protection or purchase HYG 2.5% OTM 3‑month put spreads (cost target 0.8–2.0% premium) to limit tail losses during 90‑day catalyst windows (CLO issuance or regulatory announcements).
• Avoid or reduce the GBP‑hedged share class (ISIN LU2825557270) if reported GBP hedge drag >50bp annualized versus EUR class; reallocate proceeds to the EUR Dist class or short-term funding instruments until hedging cost normalizes within 30–60 days.