Axiom European Financial Debt (Mkt Cap £55m)
4.8% NAV TR in Q1 2017
Axiom European Financial Debt's NAV grew 1.1% over March and the NAV return in Q1 was +4.8%. This positive return continues the strong performance in the second half of 2016.
Credit markets experienced another strong month, reflected in a number of positive developments- Deutsche Bank raised €8bn, while the (reduced) precautionary recapitalisation for Monte dei Paschi was approved and the UK's Co-op bank launched a sale process. March was an active month for primary issuance with c.$20bn of senior holding companies were launched, nine T2s, five AT1s, including the first Portuguese, and the first restricted T1 issued by an insurer.
The fund benefited from a number of calls in February and this is expected to continue as Axiom holds two RBS T1s and the Bank of Ireland T1 that are approaching their call. Through March the fund deployed c.£1.6m of cash, taking cash down to 2% of NAV (February: 4.6% of NAV). The fund participated in a new Santander UK AT1 issue and bought some Spanish tier 2's for the liquid relative value strategy. In the less liquid relative value bucket the fund increased its holding of fixed-to-fixed perpetuals and bought legacy tier 1's by smaller UK issuers. In the restructuring bucket the fund is no longer exposed to Co-Operative Bank, but retains exposure to Monte Paschi (1.9%), Popular (3.4%) and Novo Banco (0.5%). Axiom also participated in the new Caixa Geral AT1 issue.
Axiom has performed strongly since the credit market sell-off in Q1 2016 (+13.5% NAV return over 12 months). The outlook for 2017 remains positive as regulators have provided greater clarity on the mechanics of capital buffers. AT1 instruments have benefited from stronger capital ratios and bank profitability. Ongoing redemption of legacy instruments is likely to continue as their contribution to regulatory capital declines. The fund currently trades at 2.4% premium to NAV.
Axiom European Financial Debt (Mkt Cap £59m)
16% 12-month NAV TR
Axiom's annual report for 2016 has highlighted a NAV total return of 2.9% over the year. NAV performance was much stronger in the second half of the year and this has continued into 2017 with a NAV return in 2017 to date of 4.7%.
Shortly after listing in November 2015, market volatility led to significant markdowns across the portfolio in January and February 2016. The Additional Tier 1 (AT1) market suffered most during this period which fell to an all-time low on 11 February. The manager kept the weighting to AT1s high in Q2 2016 to benefit from the market rebound in this segment before reducing the allocation in line with the target portfolio. The company's NAV has recovered strongly since February 2016 with a NAV return of 16.3% over the next 12 months.
Investments in liquid relative value assets comprise 31% of NAV followed by less liquid relative value (24%), special situations (18%), restructuring (11%) and midcap origination (4.7%).
Axiom has performed strongly since the credit market sell-off in Q1 2016. The outlook for 2017 remains positive as regulators have provided greater clarity on the mechanics of capital buffers. Capital ratios and profitability of banks have also continued to improve steadily giving greater confidence on the payment of coupons on AT1s. Legacy instruments are also likely to benefit from ongoing redemptions as their contribution to regulatory capital declines. The shares currently trade on a 1.6% discount to NAV and offer a prospective 6.7% dividend yield.|
Axiom European Financial Debt (Mkt Cap £56m)
January performance maintains strong run
Axiom European Financial Debt's NAV rose 2.67% in January to 97.75p per share (December: 95.21p per share). We calculate a NAV return of 9.7% since 30 June 2016.
The portfolio benefited from the rebound of the banking sector in January as regulatory forbearance has lowered near-term capital requirements and strong Q4 earnings season for the banks. The primary market was active with new issuance across a number of instruments including Additional Tier 1s, Tier 2s and Tier 3s. A number of legacy Tier 1s were called-up at the first call date.
The fund's cash weighting declined from 11% to 1% during the month as new investments were made across various new issues (Intesa, StanChart and Rabobank) and French AT1s. The fund sold its position in Monte dei Paschi seniors at 98.25 (3.7% above December acquisition price) and acquired Deutsche Bank AT1s as the litigation issue was resolved.
Axiom's NAV performance has improved significantly with the 10% return since June 2016 c.4 percentage points ahead of the Merrill Lynch Financials High Yield Index over the same period. The outlook for 2017 remains positive as banks' balance sheets and capital ratios have continued to improve and credit spreads are tightening. Axiom currently trades on a 3.7% discount to NAV and the shares offer a 6.5% prospective dividend yield.|
c.£6m gross proceeds raised
Axiom European Financial Debt successfully raised gross proceeds of approximately £6m through the issue of 6,247,542 new ordinary shares at a placing price of 96.5p. The placing price represented a 1% premium to the closing price on the day before the issue and a 1.7% premium to the last published NAV. It is expected that the new shares will be admitted to trading on 4 October. Axiom currently trades a 0.7% premium to its last published NAV, broadly in line with the leveraged loans/high yield funds peer group average premium of 0.5%|
Axiom European Financial Debt
Constructive outlook on low interest rates
Axiom European Financial Debt's (AEFD or Axiom) total shareholder return for the period from 7 October 2015 (date of incorporation) to 30 June 2016 was -4.7% due to adverse economic conditions. The company's NAV per share as at 30 June 2016 was 92.02p. During the period AEFD paid two dividends totaling 1.35p per share. A further dividend of 1.5p per share was declared on 19 July 2016 and the company intends to distribute 6p per share by 31 December 2016 (an annual yield of 6.3% on yesterday's closing price).
During the period, the manager deployed funds based on the different market conditions. When the market fell sharply in February 2016, the manager bought selectively AT1s at historically low prices and towards the end of the month reduced its positions in UK AT1s to avoid the price in of Brexit concerns. The market recovered some of its losses in the months before the Brexit when it fell again. Subsequently, the bank valuations improved on the back of news of lower interest rates for longer and monetary easing, driving a recovery in AEFD's NAV.
The opportunity for Axiom to benefit from the volatility and regulatory transition of the banking sector remains unchanged and should expand in the long run. The restructuring of the European banks should be the first step after the recent ECB stress testing results. Axiom is trading at a small discount of -0.4% to its July 2016 NAV.|
Axiom European Financial Debt
2.8% NAV increase in July
Axiom European Financial Debt's NAV rose 2.8% in July 2016 to 94.6p per share. The portfolio benefited from a recovery in bank valuations on the back of expectations of further monetary easing.
Monte di Paschi performed poorly in the stress test results and have had to recapitalise the business. Subordinated creditors face the potential risk of being bailed-in under the EU's burden-sharing principle.
In terms of portfolio activity, Axiom reduced some of its UK exposure in both the liquid and less liquid relative value strategies. In the restructuring strategy, Axiom increased its exposure to Monte dei Paschi on its lows as the manager believes any exchange offer will remain voluntary and therefore offers value upside. Severak AT1 positions were sold in France and Spain as new AT1 coupon rules drove higher pricing.
The fund remains well-positioned to take advantage of any market weakness with 12% of NAV in cash. Axiom currently trades on a slight (-0.9%) discount with the shares offering a 6.3% dividend yield.|
|Liberum video presentation;
Axiom European Financial Debt
2.6% NAV total return in May
Axiom's NAV rose 1.5% in May 2016 to 93.9p per share due to a combination of market improvements and a number of portfolio-specific events. NAV total return was 2.6% after adjusting for dividends paid.
In terms of portfolio activity, 12 purchases and 16 sales were completd in the month. Sales were concentrated in the last week as valuations peaked. Cash increased from 1% to 7% in the month as a result. The portfolio yield-to-call was 12.4% at the end of May (vs. 11.3% at 30 April).
Four large AT1 positions were sold bringing liquid relative value investments down to 36% of NAV. The fund's illiquid relative value investments gained from two calls at par on bonds which had previously been valued at 65 and 89 respectively. This contributed 0.56p to the NAV uplift.
Axiom currently trades on a 1.7% premium to NAV.|
Axiom European Financial Debt Fund (BUY)
3.57% NAV growth in March
Axiom announced the 24 March 2016 NAV per share at 91.39p, a 3.57% growth for the month. Axiom, which was fully invested at the beginning of March 2016 and completed an additional raise of £3.55m by 4 March 2016, benefited from the recovery of the hybrid debt market with the BofAML Coco index reporting 5.33% growth for the month.
Axiom performed 18 purchases and 15 sales during the month, maintaining its portfolio mix.
We believe that as the European banking sector is strengthening their balance sheets and adapting to regulation, the European hybrid debt market and Axiom will continue to grow. Axiom is trading at 7.4% premium against its 1 April 2016 NAV per share.|
AEFD launched on the 5 November 2015 as the Q3 reporting season was drawing to a close. European banks continued the trend observed earlier in the year: more capital build-up, new rounds of cost cuts, decrease in provisions and slow-down in NPL formation, alongside marginal pressure on interest margins.
On the regulatory front, the FSB drew some attention with its Total Loss Absorbing Capacity metric, leaving banks subject to structural reform in countries like the UK or Switzerland with the only option to redeem their OpCo bank capital, as Lloyds tender showed.
The SSM completed its 2015 AQR for 9 remaining institutions. The largest, Novo Banco, is now clear to get sold with a capital gap below market expectations.
Lastly, Italy took its turn in the implementation of the new bail-in tool, after adopting the corresponding legislation in August. It resolved four regional banks together by moving all assets and liabilities – but subordinated debt and equity – into a new bridge bank.
All these regulatory developments took place against a backdrop of slowly emerging regulatory forbearance alleviating pressure on banks as they adapt their capital structures.
On the day following the listing, AEFD deployed 40% of its capital on the full range of its strategies: 22% on its Liquid Relative Value strategy consisting of Additional Tier 1s (11%); old-style Tier 1s with liquidity (ERSTBK 5.294, PBBGR 5.864) and insurance bonds (5%); 7% on its Less Liquid Relative Value strategy with a discount perp and a CMS-linker; and 4% on each of its Restructuring and its Special Situations strategies.
Capital deployed in accordance with the Midcap Origination strategy went promptly from 2% to 4% as AEFD subscribed for Tier 1 bond issued by a Danish savings bank ahead of its equity listing on the Copenhagen exchange, closing a two-month long origination process.
As indicated in the phase-in guidance, AEFD invested a significant proportion of funds in accordance with its Liquid Relative Value strategy in order to positions itself using other strategies to capture opportunities over the next six months. This was done essentially on AT1s from selected issuers. A strong position was also built on Delta Lloyd old-style Tier 2 bonds (5% of capital) as a capital increase was increasingly expected ahead of its investor day. This position was reduced to 3.5% of capital after capturing 15bp of profits. As of 30 November 2015, 40% of AEFD's capital was invested in accordance with its Liquid Relative Value strategy.
In parallel, the fund continued its ramp-up on less liquid instruments like fixed-to-fixed Tier 1s (6% of capital) and two bonds recently issued by Irish banks (3% of capital) while it managed to find source paper in three deeply illiquid instruments with outstanding amounts below Eur 50mn. These are typically from subsidiaries of banking groups in the process of being sold or recalibrated.
As of 30 November 2015, 81.8% of AEFD's capital has been deployed in accordance with its five strategies. The NAV started with an opening level of 98.00 and ended the month at 98.19.|
|Anyone looking at this?
Had a quick check, planned to raise up to 500 million, delayed float and only raised 50 million... hmm.|
|Well after all this time, we can now get some money back - for those who wouldn't give them away at about tuppence ha'penny.
From that level, 8p is a good return but overall it has just been dead money.
|I still don't fully understand why the share price should dive 70% when the company notifies the market that it intends to withdraw from AIM. They say that they have 68% in favour of this and presumably the 68%, whoever they are, have also seen this massive drop in the value of their quoted holdings. I wonder if Paul Bell supports this move, the last notification by the company showed that he held just over 12% of the company.
There still seems to be plenty of share activity, and not all sells. Once the company goes private we will have no visibility of how it is performing or the likely value of the share price Perhaps some speculators are betting that there will be a future share buy back at 7.625p but who could say for sure what the value of the company was at this time, would the Directors have to issue a prospectus ?
At the moment what I have is a few hundred pounds of investment, I am still prepared to let this ride and would only consider selling if there was a substantial recovery in the share price to around the 7p mark|
|techno, JoA -
The obvious effect of withdrawing from AIM is a saving in overheads which can be important in a cash squeeze.
Perhaps there could also be an implication that they see AIM as being of little further use to them as it is no longer an economical way to raise finance due to the very lowly rating accorded to nearly all of its currently listed companies.
However, there could be other reasons - which is what I suspect. Without the listing rules to adhere to, minimal though they be on AIM, certain corporate changes may well become easier and cheaper to arrange. I certainly have no information or even any clue, merely a vague suspicion that its days of independence might be numbered.
In that event I'm not sure what it would mean for holders - maybe not a bonanza financially speaking in the current climate, but from the management's perspective it could be a case of the fewer the better.|
|I more than sympathise with you Techno. I still don't understand what the advantage of withdrawing from AIM is or for that matter the disadvantage of staying.|
joan of arc
|It certainly is a bitter pill to swallow when you see the share price of what appears on the face of it to be a reasonable trading company suddenly drop 70%. For the small amount I have invested in this company at the moment I am prepared to sit it out and hope that unquoted the company will continue to pay dividends.
It seems that quite a number of small companies are withdrawing from AIM, I certainly will no be investing in AIM companies in the future|
|Re. my 149 post.
I'm not sure what the company hopes to gain other than battening down the hatches by withdrawing from AIM. At least I escaped getting scalped for once.
Unfortunately an AIM quotation does little for a company's reputation as it includes some disreputable bedfellows as we know from those already unmasked.
I am not totally critical of the management but certainly have much more sympathy for the small pi's.|
|You are welcome to vote against the motion and correct in youir observations on the effect it will have
The directors and the employees have their families and Christmas to think about. Your holding is VERY small, and what has happened is is no way unlawful
That you however for the support you have shown, the LSE sees the action as no disgrace by the way it is thouroughy supportive and of my friends doing the dame thing, an elderely couple taking over small shareholders interest in a non AIM company(full LSE listed and PAYING THEM ABOVE THE PRICE IN THE MARKET AFTER THEY PASSED ON THE DIVIDEND|
|I agree it is a total disgarace. The comment about AIM costs/distractions is a tcomplete red herring. Neither can I see that by leaving AIM they will find getting credit any easier. It is just a nasty way of disenfrachising the external PIs for the benefit of the directors and their unions/employees.
Being allowed to get away with this is just another example of the cynicism shown by the LSE towards to small investors in the AIM market and of the German disregard for shareholders interests.
Although it will do no good I shall definitely vote against the motion.|
joan of arc
|This is an absolute disgrace.
Small company doing well - then suddenly the rug is pulled from under shareholders feet.
Should make investors think twice before investing in small companies.|
|Sorry the share price fell, maybe it will go back|
|As an aside support the Kill the Spread campaign. It is in all our interests!!
See below :-
October 2008 (2)
We wrote to you earlier this month with details of the Kill the Spread campaign objectives - since then word has really started to spread! Below are the links to the latest news and articles written about the campaign over the last two months. Were you aware that the London Stock Exchange is facing a High Court claim of anti-competitive behaviour from Plus Markets??
Change we need.....so what's next?
Since we last wrote to you, we have been approached by several brokers, wanting to know more about the Campaign and offering their assistance!
We were very encouraged by this it's comforting to know we aren't the only ones complaining about the AIM and its Market Maker system. It's killing their business too!
We have learned a lot from their perspective on the way the AIM works and have now started discussions on some interesting initiatives including:
1/ Ways of creating an alternative Broker account for AIM shares, which could effectively cross stock between buyers and sellers, bypassing Market Makers and avoiding spreads.
2/ Creating a "ring-fenced" nominee account, offering guarantees to shareholders that their stock will not be loaned in the Market to cover short selling.
We think these could be very compelling propositions for Investors and any views or feedback you could give us on this would be very helpful; email@example.com
We are also discussing ways forward to achieve the big systemic changes we are looking for with Direct Market Access, and we hope to be able to update you shortly with some very interesting developments.
We are finding that there is a willingness to listen to the voice of the Private Investor, but to turn these initiatives into constructive measures, we need to prove we have sufficient numbers behind the Campaign.......... and this is where you come in!
Hitting those Numbers!
At this crucial stage your support is essential and we are now asking you to make a really big effort on behalf of Kill the Spread.....
As a growing grass roots movement, we are now being taken seriously. We want our demands to be implemented as soon as possible and the only way we can ensure this happens is to prove beyond questionable doubt that a significant number of Private Investors are totally dissatisfied with the way the AIM market currently operates and are demanding change.
In simple terms - we need to get the numbers up - and fast!
5,000 supporters = ACTION!
Our target is to get to up to 5,000 supporters. We're getting there but we need to get there quicker!! We are currently up to just over 1,300 supporters on the Poll - so there is still a way to go.
We are getting publicity but we really need the word to spread......So please, make sure you tell as many Investors you know about Kill the Spread.
You can spread the word in the many ways:
Talk to others Investors about the campaign
Post a link to the site on your Blogs
Post a link to the site on Bulletin-boards,
Tell people in you Share Club/Investor Group
Ask people to sign up at the website
and get them to complete the on-line poll
it won't cost you anything and will only take a few minutes of your time.
Help give us a real push and remember if every supporter brings in just 3 new supporters - our numbers will quadruple!!
We are now on the brink of making a real difference for all Small Cap Investors - so a big push for more supporters right now is just what we need!
Thank you once again for supporting Kill the Spread with your support change really is possible!
Kill The Spread
Please email us at firstname.lastname@example.org - if you want to know more about Campaign - all question & comments are most welcome!
The London Stock Exchange is facing a High Court claim of anti-competitive behaviour from Plus Markets
Great Article by Tom Bulford
another mention from Dominic Frisby
http://www.moneyweek.com/news-and-charts/economics/the-real-reason-hedge-funds-are-shutting-down-13595.aspx (mention is at the end of this article)|
joan of arc
Very creditable performance in the current climate.
Perhaps it was a mistake for me to sell out of this a few months back as it has since out-performed the market. Director support is encouraging and turnover growth should translate into profit in due course.
I would remain a little concerned over the growth in receivables and it would be nice to see more explanation in the narrative of the relationship between this and the prepayments showing on the opposite side of the equation. The cash position in relation to the size of these figures looks precariously thin and gives rise to concern that finacing may be required before long for expansion to be sustained. Two years' ago this would have been less of a concern than it could be now.
However, it remains on my watch list for a potential return - maybe a placing or issue will provide a suitable opportunity. Meanwhile, good luck to all holders.|