January 2025 Monthly

In our note, FY’24: another year of outperformance, we highlighted Volta’s strong performance to its year-end July. This has continued in calendar 2H’24 and, looking forward to 2025, we expect a further strong performance. The latest annualised cashflows are 21% of the NAV, despite the strong growth in NAV. We note both the positive markets, and incremental value added by the manager in asset selection and portfolio management, which have delivered a strong track record of market outperformance through a range of economic conditions. For 20 consecutive months, now, Volta has generated positive NAV returns. The discount appears to be anomalous with such a performance.

• November factsheet: The strong FY performance has continued with a 20th consecutive month of positive NAV return. The YTD return is +20.9%: +2.1% in November alone (monthly returns of 2.3% and 1.3% for CLO equity and debt tranches, respectively). Annualised cash generation is 21% of NAV.
• Rising yield: Volta’s policy is to pay annualised dividends equivalent to ca.8% of NAV (payable quarterly). The growth in NAV thus feeds through to a growing dividend with latest quarterly payment (announced 5 December) of €15c (against €12c in Dec’22). Our FY’26E yield is 10.7% (statutory cover of 2.3x).
• Valuation: Volta trades at a double discount: its share price is at a 21% discount to NAV, and we believe its mark-to-market approach includes a sentiment-driven discount to the expected cashflows. Volta’s yield is a key attraction, and, in our view, it is likely to be more than 2x covered, giving investors considerable comfort.
• Risks: Credit risk is a key sensitivity. We examined the valuation of assets, highlighting the multiple controls to ensure its validity, in our September 2018 initiation note. The NAV is exposed to 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 both the NAV and the discount to NAV may be volatile over time. We note the closest competitor to Volta has had a more stable NAV valuation due to a different asset valuation approach. Fundamental long-term returns have been robust: 8.5% p.a. (dividend reinvested basis) since inception. Volta’s performance relative to that of its peers has been strong, and returns for investments made after the financial crisis were double those in prior years.