Volta Finance Limited (VTA / VTAS) December 2024 monthly report
NOT FOR RELEASE, DISTRIBUTION, OR PUBLICATION, IN WHOLE OR PART, IN OR INTO THE UNITED STATES
Guernsey, January 22th, 2025
AXA IM has published the Volta Finance Limited (the “Company” or “Volta Finance” or “Volta”) monthly report for December 2024. The full report is attached to this release and will be available on Volta’s website shortly (www.voltafinance.com).
Performance and Portfolio Activity
Dear Investors,
Volta Finance achieved a net performance of +0.3% in the final month of the calendar year - including a dividend payment of 15 cents per share - , bringing the return of the portfolio to +21.2% for the full calendar year 2024. While our CLO Debt investments performed favourably, CLO Equity valuations were slightly down on the month amid increased volatility into year-end.
The Federal Open Market Committee (FOMC) meeting in December gave contradictory signals. They reduced interest rates as expected, but they also indicated that they might not lower rates in the future due to inflation staying above 2%. This caused 10-year U.S. Treasury bond yields to rise above 4.5% and led to market volatility worldwide. The VIX, an index that measures expected market volatility, reached its highest level since summer.
In Europe, Moody's downgraded France's credit rating to Aa3 due to political instability and President Macron's struggles to form a stable government. Similarly, German Chancellor Olaf Scholz lost a confidence vote, which could lead to early elections in 2025.
High Yield bond indices in Europe and the U.S. widened by 16bps. European leveraged loans closed flat at 98% of par, while U.S. leveraged loans improved slightly at 97.33%. The primary CLO markets remained active, but some transactions were delayed until the new year in anticipation of improved market conditions and potentially tighter markets.
In terms of performance, CLO markets have outperformed broader credit markets this year. BB-rated CLO tranches saw a total return of +19.2%. For comparison, U.S. High Yield returned +8.2%, Euro High Yield returned +8.6%, and Global Loans returned +7.3% during the same period.
Regarding 2025, major credit rating agencies expect loan default rates to decrease, with US defaults estimated to stay around 1.5% default rate (between 3%-3.5% when including restructurings). In the US, the percentage of CCC-rated loans in CLO collateral portfolios has slightly decreased from 5.0% to 4.7%, while US loan repayment rates have remained constant at 28%. In Europe, loan repayment rates have slightly decreased from 14% to 13%. Thus, we have a constructive outlook for the beginning of 2025 regarding loans. Nonetheless, we do expect further loan spread compression coming which should show into the level of CLO Equity distributions through 2025 requiring an active refinancing and reset strategy for existing CLO.
Turning to Volta, cashflow generation continued to be steady, highlighting the strength of the book’s risk positioning. Over the last 6 month period, the cashflow generation was stable at c.€30m equivalent of interests and coupons, representing c.22% of December’s NAV on an annualized basis.
In terms of portfolio activity, it was actually a rather busy month with notably the redemption in full of a US BB-rated position as well as profit taking on high cash price BB-rated and single-B rated Euro CLO tranches. Proceeds were used to fund our warehouse commitments as well as purchasing a significant stake in a European CLO Equity tranche from the new issue market.
Over the month, Volta’s CLO Equity tranches returned -1.0% performance** while CLO Debt tranches returned +1.4% performance**, cash representing c.1.2% of NAV. The fund being c.27% exposed to USD, the recent appreciation of USD vs EUR had a positive impact of +0.6% on the overall performance.
As of end of December 2024, Volta’s NAV was €274.4m, i.e. €7.50 per share.
*It should be noted that approximately 4.29% 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 0.35% as at 30 November 2024, 3.90% as at 30 September 2024.
** “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 Manager AXA Investment Managers Paris François Touati francois.touati@axa-im.com +33 (0) 1 44 45 80 22
Corporate Broker Cavendish Securities plc Andrew Worne Daniel Balabanoff +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 its 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. The Company currently seeks to achieve its investment objectives by pursuing exposure predominantly to CLO’s and similar asset classes. A more diversified investment strategy across structured finance assets may be pursued opportunistically. 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.
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ABOUT AXA INVESTMENT MANAGERS AXA 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 2,700 professionals and €844 billion in assets under management as of the end of December 2023.
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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.
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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.
