Serge Demay, the Head of CLO Investments, AXA IM, and manager of Volta Finance, joined Hardman & Co for a live presentation and Q&A webinar on Hardman Talks on Thursday 9 June 2022.
The current environment with inflation, interest rate hikes and the Ukraine crisis increases both the potential risk and reward. In this webinar, we heard from Volta’s manager how it is “Seizing opportunities in volatile times”. It reduced the cost of embedded leverage significantly in 2021 through refis and rests and the majority of the Company’s assets are floating rate (so benefiting from rising interest rates). Additionally, the flight to safety and the US dollar strength has benefited shareholders with around 30% net exposure.
As at the end of April Volta’s YTD performance was positive. With cashflows of 15%-17% of NAV, the dividend (8% of NAV) is very well covered and excess cash flow gives the flexibility to add attractive primary and secondary opportunities with high projected returns. Looking forward defaults are expected to rise (maybe in the area of 1% at the end of 2022 (lower for the US) and 2% to 3% default rate in 2023) but Volta may be expected to benefit from higher WAS (Weighted Average Spread) inside CLOs, generating strong cash flows from Volta’s CLO equity positions. The starting position for corporates is very positive with profits up 31% 4Q’21 on 4Q’19 while corporate debt is up 15% over the same period.
The Q&A session was very broad, covering a number of aspects of credit risk, management and control, discount management, the dividend and prospective growth, fees, operational issues and management and AXA IM’s competitive advantages.
You can download the slides used here and read our latest research on the company here.
Volta Finance is a closed-ended, limited liability investment company that aims to provide a steady stream of quarterly dividends pursuing exposure predominantly to Collateralised Loan Obligations (CLOs) and similar asset classes.
