Volta Finance Ltd (LON:VTA) monthly report for October 2023, published by AXA IM.
PERFORMANCE and PORTFOLIO ACTIVITY
Volta Finance posted another positive monthly performance in October 2023 (+0.5%) bringing the YTD performance to 19.1%.
As Portfolio Managers, we always try to think outside the box and implement our views in order to optimize returns whilst keeping enough flexibility to face “exogenous shocks” should they arise. The breakout of an unexpected full-blown conflict in the Middle-East had – and still has – grounds to embody such an event as its implications may send shockwaves far beyond the peninsula. In the meantime, we were also conscious of the mixed economic indicators released worldwide as on one side the US and China displayed favorable GDP growth numbers hinting to a recovery in terms of consumer spending while on the other side Europe was facing stagnant growth outlooks amid fiscal concerns. The trajectory of the Leveraged Loan Index (ELLI) was dictated by those elements, it peaked at 96.7% in late September then retraced to 95.0% by mid-October. Following the dovish stance from the Fed post data release, it rebounded and closed at 95.4% on the 1st of November. The price moves on CLO debt tranches were down, unsurprisingly: the average USD CLO BB tranche price moved from 88.9% in September to 87.7% in October (JPM CLO Index).
Volta’s underlying sub asset classes monthly performances** were as follow: -2.2% for Bank Balance Sheet transactions, +0.8% for CLO Equity tranches, -0.3% for CLO Debt tranches and +5% for Cash Corporate Credit and ABS. No real impact of FX in October (long USD vs. EUR), with a contribution – although positive – of only +0.1% in terms of performance.
In terms of activity, we remain invested in two US CLO warehouses while the European warehouse stake will be converted imminently into the CLO’s Equity tranche as well as the Single-B. For the reminder, the warehouse’s IRR is expected in the 20% and the overall investment above 15% IRR. Our trading actions were skewed towards buyers of Risk as we deployed the proceeds of the asset sales implemented last month to buy c. Eur 10mm of low mezzanine risk – spread across five individual tickets. As market widened and offered opportunities fit for Volta Finance’s target return, we believe the entry point was right.
As of end of October 2023, Volta’s NAV was €239.4m, i.e. €6.54 per share.
*It should be noted that approximately 5.95% of Volta’s GAV comprises investments for which the relevant NAVs as of 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 5.55% as of 31 September 2023, 0.40% as of 30 June 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.
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.
