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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 22% of the NAV, despite the strong NAV growth. We note both the positive markets, and value added by the manager in asset selection and portfolio management, which have delivered a record of market outperformance through a range of economic conditions. For 21 consecutive months, Volta has generated positive NAV returns, delivering 21.2% total return in 2024 after 24.5% in 2023. The discount appears to be anomalous with this performance.

  • December factsheet: The strong performance has continued; 21st consecutive month of positive NAV returns. The 2024 total return of +21.2% compares with BB-rated CLO tranches +19.2%, US high yield +8.2%, Euro high yield +8.6%, and global loans returned +7.3%. Cash generation was 22% of December NAV.
  • Director share buying: We believe that director buying shares in the market is one of the most positive indicators of their confidence in the company. On 17 January, the Chair bought 19k shares, at €6.08, an investment of €115k. This more than doubles her holding and follows directors’ compensation in shares.
  • Valuation: Volta trades at a double discount: its share price is at a 19% 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: 9.0% 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.
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