AXA IM has published the Volta Finance Ltd (LON:VTA) monthly report for April 2024
PERFORMANCE and PORTFOLIO ACTIVITY
Dear all,
Volta Finance recorded again a positive month in April at +1.3%, bringing the year-to-date return to +7.6%. For context, US High Yield returned -1.0% on the month and +0.5% year-to-date, while European High Yield was flat on the month (+1.6% YtD).
The credit markets experienced volatility in mid-April, leading to a sharp repricing that was partially retraced by month-end. The US 10-year bond yields increased to 4.70% from 4.20% at the end of March, challenging the soft-landing narrative due to latest economic data and concerns regarding the persistence of high rates. The Fed delivered a rather dovish message though, expressing confidence in their restrictive policy to bring inflation back to target. Earnings season showed opposite directions for average earnings growth in the US and Europe, but both regions beat expectations. Regarding the leverage loan markets, the Morningstar LLI and ELLI 12-month rolling default rates settled respectively at 1.31% and 1.48%, a testimony of companies’ ability to access financing. Pricing-wise, Euro Loans were up 50 cents at 97.15px while US Loans were slightly down (96.64px from 96.75px on the previous month).
CLO-wise, the broader market volatility impacted negatively CLO BB and single B tranches as well as CLO Equity tranches as risk premium rose. Volta Finance’s book was not immune and mark-to-market valuations for both the CLOs Debt and Equity pockets closed down on the month. However, Volta benefited from strong CLO Equity payments, reaching record levels in April (5-year highs in Europe, 8-year highs in the US). As a result, cashflow generation kept on being strong with €28.8m equivalent of interests and coupons over the last 6 months on an annualized basis (i.e. 22% of the April 2024 NAV).
Volta’s underlying sub asset classes monthly performances** were as follow: +1.1% for Bank Balance Sheet transactions, +2.96% for CLO Equity tranches, +1.0% for CLO Debt tranches and -15.7% for Cash Corporate Credit and ABS***.
As of end of April 2024, Volta’s NAV was €258.7m, i.e. €7.07 per share.
*It should be noted that approximately 5.6% of Volta’s GAV comprises investments for which the relevant NAVs as at the month-end date are normally available only after Volta’s NAV has already been published. Volta’s policy is to publish its NAV on as timely a basis as possible to provide shareholders with Volta’s appropriately up-to-date NAV information. Consequently, such investments are valued using the most recently available NAV for each fund or quoted price for such subordinated notes. The most recently available fund NAV or quoted price was 5.36% as at 30 March 2024, 0.24% as at 31 December 2023.
** “performances” of asset classes are calculated as the Dietz-performance of the assets in each bucket, taking into account the Mark-to-Market of the assets at period ends, payments received from the assets over the period, and ignoring changes in cross-currency rates. Nevertheless, some residual currency effects could impact the aggregate value of the portfolio when aggregating each bucket.
*** The cash Corporate Credit and ABS bucket is currently made of 3 legacy assets representing 0.8% of GAV.
Volta Finance Ltd (LON:VTA) is a closed-ended limited liability company registered in Guernsey. Volta’s investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis.
