Volta Finance Limited : Net Asset Values as at 29 February 2020
Volta Finance Limited (VTA / VTAS) –
February 2020 monthly report
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE
OR IN PART, IN OR INTO THE UNITED STATES
***** Guernsey, 11 March 2020
AXA IM has published the Volta Finance Limited
(the “Company” or “Volta Finance” or “Volta”) monthly report for
February. The full report is attached to this release and will be
available on Volta’s website shortly (www.voltafinance.com).
PERFORMANCE and PORTFOLIO
ACTIVITY
In February, Volta’s NAV* total return
performance was -2.6%.
The monthly performances** were, in local
currency: +0.8% for Bank Balance Sheet transactions, -3.8% for CLO
Equity tranches; -2.1% for CLO Debt; -0.1% for Cash Corporate
Credit deals; and +0.4% for ABS.
We sold two CLO debt positions (one BB and one B
rated tranche) before the market was impacted by the spreading of
the COVID-19 crisis. We also refrained from investing the circa
€11m cash we received from our assets in January and February.
As a result of that, at the end of February cash
or cash equivalents represent close to 10% of the NAV.
In March, performance is expected, once again,
to be negative despite the benefits of diversification across the
portfolio – by way of example, the bank balance sheet transaction
bucket produced a positive performance in February.
Beyond the current volatility we have to think
about the lessons and the consequences from the current COVID-19
crisis for our fund:
- in terms of price reaction with recent episodes of price
volatility, we did not see particular signs of panic or abnormal
behaviour. At the time of writing, BB CLO and Equity CLO tranches
prices have fallen very much in line with underlying loan market
prices with usual betas (between 2 and 3);
- In terms of market liquidity, as we would have anticipated,
liquidity was significantly better for US loans than for European
loans. This has meant that the ability of CLO managers to adapt
their loan book to the current situation has been far greater for
US CLOs than for EUR CLOs. This is the principal reason why
we have no positions in EUR CLO debt;
- In terms of fundamentals, we were expecting 2020 to be a
challenging year once again for loan markets and, like 2019, we
were expecting to have again in the area of 2.5 downgrades for
every upgrade in underlying credits. With the COVID-19 crisis it
could be reasonably expected that even more downgrades will occur,
which will place price pressures on B/B- rated loans.
When considering the impact in terms of defaults
it is important to note that, for many years, loans have been
issued without maintenance covenants (cov-lite loans). Most
Generally, investors have considered that as a weakness. We always
claimed that it had at least one benefit: giving more time to
companies to go through a temporary trough in activity. The current
situation is one such where being “cov-lite” might help.
It is far too early to form a clear view on the long-term impact
of the crisis but the clear mantra of European and the US
governments is to take measures that will limit the spread of the
virus while having the least possible impact on business activity.
It is also very clear that most governments will support companies
going through the crisis, for instance by permitting delayed tax
payments.
For the moment, considering the level of uncertainty we have
decided to refrain from investing the current cash balance. The
choice we made several quarters ago to favour CLO Equity relative
to CLO Debt and to reduce the repo and hence the leveraging of CLO
Debt was correct. If the current crisis permits CLO managers to
reinvest in loans at discounted prices or with higher spreads, we
should see higher cash flows from our CLO Equities before suffering
the possible consequences of the crisis.
One of the reasons for our preference for CLOs (relative to many
other ABS businesses) is again playing out in our favour: loans are
issued by wide range companies that are representative of the
overall economy. When there is a risk we might suffer some
losses (due to loan defaults or a very large number of downgrades),
governments and central banks mitigate this risk because of the
macro impact associated with that risk. It is clearly not an
insurance that losses will always be avoided but it is a strong
mitigant regarding the risk associated with our investments.
As at the end of February 2020, Volta’s NAV was
€273.9m or €7.49 per share. The GAV stood at €308.4m.
*It should be noted that approximately 11.0% 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 own
NAV on as timely a basis as possible in order 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
note. The most recently available fund NAV or quoted price was for
6.0% as at 31 January 2020, 3.8% as at 31 December 2019 and 1.2% as
at 30 September 2019.
** “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.
CONTACTS
For the Investment ManagerAXA
Investment Managers ParisSerge Demayserge.demay@axa-im.com+33 (0) 1
44 45 84 47
Company Secretary and
AdministratorBNP Paribas Securities Services S.C.A,
Guernsey Branch guernsey.bp2s.volta.cosec@bnpparibas.com +44
(0) 1481 750 853
Corporate Broker Cenkos Securities plc Andrew
WorneDaniel BalabanoffRob Naylor+44 (0) 20 7397 8900
***** ABOUT VOLTA FINANCE
LIMITED
Volta Finance Limited is incorporated in
Guernsey under The Companies (Guernsey) Law, 2008 (as amended) and
listed on Euronext Amsterdam and the London Stock Exchange's Main
Market for listed securities. Volta’s home member state for the
purposes of the EU Transparency Directive is the Netherlands. As
such, Volta is subject to regulation and supervision by the AFM,
being the regulator for financial markets in the Netherlands.
Volta’s investment objectives are to preserve
capital across the credit cycle and to provide a stable stream of
income to its shareholders through dividends. Volta seeks to attain
its investment objectives predominantly through diversified
investments in structured finance assets. The assets that the
Company may invest in either directly or indirectly include, but
are not limited to: corporate credits; sovereign and
quasi-sovereign debt; residential mortgage loans; and, automobile
loans. The Company’s approach to investment is through vehicles and
arrangements that essentially provide leveraged exposure to
portfolios of such underlying assets. The Company has appointed AXA
Investment Managers Paris an investment management company with a
division specialised in structured credit, for the investment
management of all its assets.
*****
ABOUT AXA INVESTMENT
MANAGERSAXA Investment Managers (AXA IM) is a multi-expert
asset management company within the AXA Group, a global leader in
financial protection and wealth management. AXA IM is one of the
largest European-based asset managers with 739 investment
professionals and €750 billion in assets under management as of the
end of March 2019.
*****
This press release is published by AXA
Investment Managers Paris (“AXA IM”), in its capacity as
alternative investment fund manager (within the meaning of
Directive 2011/61/EU, the “AIFM Directive”) of Volta Finance
Limited (the "Volta Finance") whose portfolio is managed by AXA
IM.
This press release is for information
only and does not constitute an invitation or inducement to acquire
shares in Volta Finance. Its circulation may be prohibited in
certain jurisdictions and no recipient may circulate copies of this
document in breach of such limitations or restrictions. This
document is not an offer for sale of the securities referred to
herein in the United States or to persons who are “U.S. persons”
for purposes of Regulation S under the U.S. Securities Act of 1933,
as amended (the “Securities Act”), or otherwise in circumstances
where such offer would be restricted by applicable law. Such
securities may not be sold in the United States absent registration
or an exemption from registration from the Securities Act. Volta
Finance does not intend to register any portion of the offer of
such securities in the United States or to conduct a public
offering of such securities in the United States.
*****
This communication is only being
distributed to and is only directed at (i) persons who are outside
the United Kingdom or (ii) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (the “Order”) or (iii) high net
worth companies, and other persons to whom it may lawfully be
communicated, falling within Article 49(2)(a) to (d) of the Order
(all such persons together being referred to as “relevant
persons”). The securities referred to herein are only available to,
and any invitation, offer or agreement to subscribe, purchase or
otherwise acquire such securities will be engaged in only with,
relevant persons. Any person who is not a relevant person should
not act or rely on this document or any of its contents. Past
performance cannot be relied on as a guide to future
performance.
*****This press release
contains statements that are, or may deemed to be, "forward-looking
statements". These forward-looking statements can be identified by
the use of forward-looking terminology, including the terms
"believes", "anticipated", "expects", "intends", "is/are expected",
"may", "will" or "should". They include the statements regarding
the level of the dividend, the current market context and its
impact on the long-term return of Volta Finance's investments. By
their nature, forward-looking statements involve risks and
uncertainties and readers are cautioned that any such
forward-looking statements are not guarantees of future
performance. Volta Finance's actual results, portfolio composition
and performance may differ materially from the impression created
by the forward-looking statements. AXA IM does not undertake any
obligation to publicly update or revise forward-looking
statements.
Any target information is based on
certain assumptions as to future events which may not prove to be
realised. Due to the uncertainty surrounding these future events,
the targets are not intended to be and should not be regarded as
profits or earnings or any other type of forecasts. There can be no
assurance that any of these targets will be achieved. In addition,
no assurance can be given that the investment objective will be
achieved.
The figures provided that relate to past
months or years and past performance cannot be relied on as a guide
to future performance or construed as a reliable indicator as to
future performance. Throughout this review, the citation of
specific trades or strategies is intended to illustrate some of the
investment methodologies and philosophies of Volta Finance, as
implemented by AXA IM. The historical success or AXA IM’s belief in
the future success, of any of these trades or strategies is not
indicative of, and has no bearing on, future results.
The valuation of financial assets can
vary significantly from the prices that the AXA IM could obtain if
it sought to liquidate the positions on behalf of the Volta Finance
due to market conditions and general economic environment. Such
valuations do not constitute a fairness or similar opinion and
should not be regarded as such.
Editor: AXA INVESTMENT MANAGERS
PARIS, a company incorporated under the laws of France, having its
registered office located at Tour Majunga, 6, Place de la Pyramide
- 92800 Puteaux. AXA IMP is authorized by the Autorité des Marchés
Financiers under registration number GP92008 as an alternative
investment fund manager within the meaning of the AIFM
Directive.
*****
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