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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Angel Oak High Yield Opportunities ETF outperformed in Q4 through corporate credit selection, particularly in energy. Despite credit spreads at post-GFC tights and elevated valuations, managers expect continued tightening from economic resilience and credit quality improvements."
Angel Oak High Yield Opportunities ETF returned 0.21% in Q4 2024, outperforming the Bloomberg U.S. Corporate High Yield Index by 4 bps. The fund benefited from corporate credit allocation which returned 0.7% versus the benchmark's 0.2%. High-yield corporate credit spreads tightened 13 bps during the quarter and reached post-GFC tights of 253 bps in November before widening with rising Treasury yields. Energy was the top sector contributor with a 1.0% return driven by selection in a liquefied natural gas company. Communications detracted due to underweight allocation and selection issues including a leveraged television broadcaster. The economic environment remains stable with low unemployment and resilient consumer spending, though signs of weakening persist with rising credit card delinquencies. Fed rate cut expectations for 2025 declined significantly from 200-250 bps to 25-50 bps. Despite historically tight credit spreads and elevated valuations, the managers see potential for continued spread tightening supported by economic resilience and higher credit quality. They are reducing securitized credit overweight in favor of high-quality corporate issuers.
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