Johkim Capital Preservation Notice
In Johkim Capital’s September letter, portfolio manager Jatin Kakkar informed investors that the firm will be transitioning to its “Preservation-Plus” strategy after moving to “Risk-On” in March 2020. This latest move came from Johkim’s recognition that overall market conditions have shifted to fully or overpriced, noting overall spreads close to historic lows (300 bps), a virtual absence of bankruptcies and a significant number of issuers being upgraded to investment grade. The portfolio transition will allow for earning residual Risk-On returns through current holdings while re-positioning the portfolio to preserve capital and provide liquidity to redeploy capital in a crisis.
Market metrics cited by Mr. Kakkar include historically tight high yield spreads, recovery in Covid impacted sectors of energy, retail, restaurants, and airlines, record high yield issuance in 2020, and 100 new distressed issuers (down from 800+ in March 2020).