Axiom European Financial Debt Fund (AXI) has made a 21% total return over the last 12 months, well above the average of its debt investing closed-end funds peers. AXI’s investment space, European financials regulatory capital debt, has remained buoyant. Bank capital equity ratios remain high, NPLs are falling, balance sheet liquidity is comfortable and profitability is growing (eurozone banks’ average ROE was 7.2% in Q121). Rising interest rates (if not excessive) should be good news for banks’ margins and profitability at this stage of the cycle. AXI’s portfolio has a 7.8% running yield; 8.3% to perpetuity. AXI is trading on an 11% discount to NAV with a covered 6.4% dividend yield.
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