Current annual returns of PRObonds portfolios (for the last 365 days): 19.6% for portfolio # 1, 14.9% for portfolio # 2. The high yield is explained by the effect of the low base, last March the bonds were much cheaper than the current levels and sometimes had yields above 20%. Since the beginning of 2021, portfolios have yields of 9.5% and 8.1% per annum. Significantly lower than 365 days, but much better than the average in the bond market and even in the HDR market (the Cbonds HDR index has yielded 7.8% since the beginning of the year, and this is in the absence of transaction costs).
The release of the cash cushion (target of 6% of assets) began in the first decade of March and is almost complete. Now it remains to reduce the position only in PKB securities, which are amortized as their maturity approaches. In April, we plan to conduct 2 bond placements (April 13, IFC “Bystrodengi”, for qualified investors, on April 22 the construction company “Litana”). They will require about 7-8% of portfolio assets, while now less than 6% is free. So the gradual reduction in long-standing or excess bond positions will continue. Since mid-2020, we have almost stopped completely withdrawing certain securities from portfolios, limiting ourselves to reducing their shares.
Yesterday OR Group (Obuv Rossii) published its annual financial results. Despite maintaining profitability, the company violated the covenants on 2 bond issues (exceeding the debt to EBITDA ratio) and announced offers for these issues. This affected bond prices, which fell by 0.5-1%. Our portfolios almost did not feel this, not only due to diversification, but also because the largest decline was shown by OP 1P1 papers, while in the PRObonds portfolios there are later issues of OP bonds. The company set up investors in advance for a possible violation of the covenants and prepared for offers (including for these purposes, a bond issue worth 1.5 billion rubles was placed in January). Therefore, if the decline in 1P1 issue continues, there is a high probability of buying these into portfolios.
A few words about portfolio # 2, which has a speculative component. When we launched public portfolios in mid-2018, the understanding of how much money could be made on the high-yield bond segment and whether it was possible to make money, in principle, was weak. In general, we came to targeting bond yields only this year. And to reduce the risk, portfolio # 2 was created, which includes a speculative component. Over time, our specialization in bonds grows, and attention to speculative trends decreases. This is reflected in the growth of the efficiency of portfolio # 1, which operates only in bonds, and its stagnation in portfolio # 2. Until autumn or until the end of this year, portfolio # 2 will definitely be maintained, however, if the gap with portfolio # 1 persists, then it will most likely be closed.
The target return for both portfolios for 2021 is 11% before personal income tax, taking into account the bond market drawdown in Q1. All portfolio transactions are published in the public domain until they are completed.
Not an investment recommendation