During the turbulent April, the PCGA Strategy returned -0.10% compared to the benchmark Bloomberg Global Aggregate Corporate Index which returned +0.36%.
April was dominated by President Trump’s tariff announcements and the subsequent 90-day pause. The month saw some of the most extreme market moves since the 2008 crisis including two days of intra-day moves of 9% in the S&P 500. Having been down -22% and -27% respectively from their 2025 at the nadir, the S&P 500 index finished the month down only -0.7% and the NASDAQ 100 ended the month up +1.5%.
Benchmark credit spreads underperformed equity markets, with the Bloomberg USD Corp Agg Index ending the month wider by 13bps at 106bps and its European counterpart 15bps wider at 111bps. US government bond yields materially underperformed their global peers, with the 10-year Treasury yield falling just 4bps over the month, compared to German, French, UK, and Australian yields were all lower by 25-30bps.
Prior to 2nd April, Coolabah implemented a range of robust and defensive measures, including reducing exposure to USD and EUR credit, allocating to more higher-rated and lower-beta credit, and putting in place explicit insurance in the form of credit default swap hedges. This meant that we had tremendous dry powder to use when the volatility erupted.
On the evening of 9th April, Coolabah cut all its hedges/shorts and started aggressively buying assets, continuing to deploy capital actively throughout the month. This activity contributed to portfolio performance being much more resilient than previous periods when equities declined 20-30%. It also meant that Coolabah’s portfolios rebounded strongly in the second half of the month, which was a trend that continued into May, recouping half of April’s underperformance in the first two trading sessions.
Since its 10th October 2023 inception, PCGA’s GBP share class has cumulatively outperformed the benchmark by +1.90% net with an absolute return of +15.36% net of fees compared to the index return of +13.46%.
PCGA’s current weighted average yield to expected maturity is 6.32% compared to the Index’s 5.29%. PCGA’s weighted-average credit rating of A is higher than the Index’s A- rating. The weighted average rating of PCGA’s active (as opposed to passive) exposures is also A.
Primary markets were essentially closed for the first half of the month following the volatility triggered after “Liberation Day” on 2nd April. It is when markets reopen from these hiatuses that the Strategy typically delivers its strongest performance. During these periods, we typically see pricing dislocations emerge, creating significant opportunities across both primary and secondary markets.
Primary markets reopened on 10th April and US issuers continued to take advantage of attractive funding conditions in Europe with Alphabet (Google), Citigroup, Morgan Stanley, and Visa being the most notable US names to bring so-called ‘Reverse Yankee’ deals in Euro. According to data from JP Morgan, year to date supply of these deals has reached €63bn massively surpassing the previous record of €49bn. In total, the Fund participated in 33 deals in April, including 15 Financials, 15 Corporates, and 3 SSA deals.
