Axiom European Financial Debt sees attractive entry points – Axiom European Financial Debt (AXI) has reported results for the year to December 31, 2018 with shareholder total returns down following the challenges the sector faced in the fourth quarter. AXI was setup to take advantage of change in the regulatory environment applying to the capital structures of financial institutions and this remains its core focus.
Most of the losses recouped
- Total return per share over the year net of all expenses was -8.00% (2017: +16.14%). Most of this has been recouped in the first quarter of 2019 and up to 29 March 2019 (the latest available data at the time of writing), the total return per share net of all expenses is +6.00%.
- The company’s performance was in the middle of its peer group in 2018
- The company declared four dividends each of 1.50p per ordinary share in relation to the year. We note that its trailing annual dividend yield at the time of writing is 6.94%
Manger sees value in financials
AXI’s manger, Gildas Surry, had this to say on the fund’s outlook: “The market was struck by a lack of liquidity at the end of 2018. Financials led the rise at the beginning of the year despite the persisting economic concerns (brexit, the recession in Italy, the trade war between China and the United States) offset by the relatively dovish tone of the ECB.
Over the year, the spreads of subordinated debt have widened from 104 bps to 227 bps. We believe the decline in financial valuations is not justified given the strong fundamentals. The latter have not stopped improving since the crisis (average capital level significantly increased to 14.70% in September 2018, four times as much as in 2007) and we have seen a number of favourable developments throughout the year confirming the continuous normalisation of European bank balance sheets:
We believe this dichotomy between fundamentals and valuations offers very attractive entry points: the underlying credit quality has not changed, and prices should recover as soon as the negative sentiment reverses.”
AXI: Axiom European Financial Debt sees attractive entry points