Axiom European Financial Debt Fund (LSE: AXI)

Currency in GBP

Last close As at 25/01/2023

GBP0.84

0.25 (0.30%)

Market capitalisation

GBP82m

Axiom European Financial Debt Fund (AXI) 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.

Equity Analyst

Pedro Fonseca

Pedro Fonseca

Analyst, Financials

Key Management

  • David Benamou

    CEO

Balance Sheet

Forecast net debt (£m)

6.4

Forecast gearing ratio (%)

109

Share Price Performance

Price Performance
% 1M 3M 12M
Actual 6.0 7.2 (10.6)
Relative (1.1) (5.5) (10.6)
52 week high/low 99.5p/78.5p

Overview

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 a way to earn a premium return. Affected by volatile financial markets, AXI posted a negative 8.7% total return over 12 months, outperforming the ICE BofA euro financial and European high- yield indices. The fund has not had any defaults or forced loan to equity conversions. We continue to believe that loan impairments will inevitably rise as economies deteriorate, but this is mostly an equity story and, for the sizeable majority of banks, the regulatory capital instruments (that AXI invests in) will not be called on to absorb asset losses, allowing AXI to benefit from their premium yields. The market distortion means that the portfolio currently has an 11.0% running yield, and 14.7% to perpetuity. AXI is trading on a 9% NAV discount with a 7.2% dividend yield.

Thematics

Consumer

IPO apocalypse

TMT

ESG, moving beyond the box tick

Investment Companies

The case for US capital markets

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