July 2019 Monthly

The NAV performance in May (+1.3%) and since the beginning of the year (+7.3%) again demonstrated Volta’s ability to generate good returns, and more than reversed the NAV fall seen in 4Q’18. In 2016, after suffering the contagion of the oil and gas crisis in the US, Volta experienced a similarly strong performance (+15.2% in calendar 2016). Volta’s portfolio yields in excess of 11%. Serge Demay, from Fund Manager AXA IM, presented at the Hardman 17 June 2019 Forum (see video, https://hardmanandco.com/june-investor-forum/). We reviewed the questions raised by investors in our note, Manager’s Hardman forum presentation (https://hardmanandco.com/research/corporate-research/managers-march-2019-presentation/ published 17 June 2019.

• Volta monthly report: May NAV rose 1.3% (YTD 7.3%), to €8.13 per share. Monthly performances were: CLO equity tranches +1.5%, CLO debt tranches +1.1%, bank balance sheet transactions +0.8%. The local currency performances of other asset classes were Cash Corporate Credit deals +1.5% and ABS +0.2%.
• Peer April reports: Blackstone GSO Loan Financing’s € NAV rose 0.14% (YTD 5.53%), Fair Oaks Income’s $ NAV rose 0.02% (4.1%), Marble Point’s $ NAV fell 0.7% (11.3%), TwentyFour Income Fund’s £ NAV rose 0.63% (2.6%). Carador is in wind-up. We reviewed Volta and its peers in Diving deep finds you the treasure.
• Valuation: Volta trades at a 16% discount to NAV. Peer-CLO finance funds trade at a ca.6% 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 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: ca.10% p.a. (dividend re-invested basis) over five years. The current portfolio-expected NAV return is more than 10%. The historical yield is 9.0%, and we believe is covered by predictable income streams in 2019E.