Johkim Risk-On Notice

March 23, 2020 In Johkim Capital’s March letter, portfolio manager Jatin Kakkar informed investors that the firm will be transitioning to its “Risk-On” strategy from “Preservation-Plus. ” This move came from Johkim's recognition that overall market conditions had shifted, citing the Coronavirus as the chief catalyst. Recognizing indicators such as high spreads (1,000bps), funds facing redemptions, and management teams cutting dividends to focus on balance sheets, JCP quickly pivoted to a more aggressive portfolio composition in pursuit of alpha generation.
Market metrics cited by Mr. Kakkar include overall high yield spreads wider than 649bps, pain felt across sectors such as energy (over half the distress debt supply), travel, and retail, 712 new distressed issuers (from 105 in 2019), and standstill high yield issuance in March.
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