September 2019 Monthly

The NAV has risen 6.9% since the end of 2018; slightly above the average run rate over the past five years (9.6% p.a.). In the past month the discount has widened from 12% to 13%) a similar trend to the peer average (discount widened 5% to 7%). In our Directors Talk interview, we highlighted why we believe Volta has the right approach to valuation (e.g. all its CLO positions, ca 75% of gross asset value use an independent pricing provider not prices from arranging banks), corporate governance, and how it manages its liquidity to never be a forced seller of assets. The latter is through its permanent capital structure and only having 16% of assets which by nature could not be sold overnight.

• Volta monthly report: July NAV rose 0.5% (YTD 6.9%), to €7.94 per share with the $ appreciation against Euro being the main driver. The performances in local ccy were: +1.0% for Bank Balance Sheet transactions, +0.8% for CLO Equity; -0.3% for CLO Debt; -4.4% for Cash Corporate Credit deals; and +0.5% for ABS.
• Peer April reports: Blackstone GSO Loan Financing’s € NAV fell 1.6% (YTD 3.8%), Fair Oaks Income’s $ NAV rose 1.54% (4.0%), Marble Point’s $ NAV fell 0.3% (9.9%) and TwentyFour Income Fund’s £ NAV rose 0.6% (3.6%). We reviewed Volta and its peers in our report, Diving deep finds you the treasure.
• Valuation: Volta trades at a 13% discount to NAV. Peer-CLO finance funds trade at a ca.7% 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 9.0%, and we believe is covered by predictable income streams in 2019E.