Axiom European Financial Debt Fund is a Guernsey-domiciled, London-listed, closed-end fund investing in regulatory capital securities in Europe. It seeks opportunities presented by Basel III and Solvency II transitions. It has a diversified approach across a broad range of subordinated debt issued by financial services companies. It uses five sub-strategies to obtain attractive current income and capital gains. AXI has a target return of 10% pa over seven years.
Investment summary
Axiom European Financial Debt Fund (AXI) is a closed-end fund that invests in European financials regulatory capital. If a bank’s operations and equity position are robust enough to withstand shock asset losses, these instruments can be to a way to earn a premium return. Axiom also seeks opportunities from regulatory changes that lead banks to redeem some of their legacy instruments that no longer have the same capital rating under stricter rules. This is a niche space where it is important to be familiar with not only the banks, but also regulation, local legislation and even politics. The portfolio has a 6.1% running yield; 7.3% to perpetuity. The stock is trading on a 6.5% dividend, 8% below NAV.
