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NAV has risen 6.4% since the beginning of the year – somewhat above the average run rate over the past five years (9.6% p.a.). With a rise in the share price over the past month, the discount has closed from 16% to 12% now. We reviewed the questions raised by investors following Serge Demay’s (Fund Manager AXA IM) presentation at the Hardman & Co 17 June 2019 Forum in our note, Manager’s Hardman forum presentation, published on 26 June. In our Directors Talk interview, we also highlighted why we believe Volta has the right approach to valuation and corporate governance, and how it manages its liquidity to never be a forced seller of assets.

  • Volta monthly report: June NAV fell 1.0% (YTD 6.4%), to €7.90 per share. Half the drop was due to the $ depreciation over the month. PricingDirect is now used for 76% of the portfolio, including CLO equity positions, allowing an earlier disclosure of the monthly NAV (target 8-10 business days post month-end).
  • Peer April reports: Blackstone GSO Loan Financing’s € NAV fell 0.15% (YTD 5.37%), Fair Oaks Income’s $ NAV fell 1.63% (2.4%), Marble Point’s $ NAV fell 1.0% (10.2%) and TwentyFour Income Fund’s £ NAV rose 0.37% (3.0%). Carador is in wind-up. We reviewed Volta and its peers in our report, Diving deep finds you the treasure.
  • Valuation: Volta trades at a 12% discount to NAV. Peer-CLO finance funds trade at a ca.5% discount. In recent months and over the medium term, Volta has delivered a better NAV performance than its immediate peers and in-line volatility, making this relative discount anomalous.
  • Risks: Credit risk is a key sensitivity (Volta has a widely-diversified portfolio). We examined the valuation of assets, highlighting the multiple controls to ensure its validity, in our initiation note. NAV is affected by sentiment towards its own and underlying markets. Volta’s long $ position is only partially hedged.
  • Investment summary: Volta is an investment for sophisticated investors, as there could be sentiment-driven, share price volatility. However, long-term returns have been good: nearly 10% p.a. (dividend re-invested basis) over five years. The current portfolio-expected NAV return is more than 10%. The historical yield is 8.9%, and we believe is covered by predictable income streams in 2019E.
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