Henderson managers, Ian Barrass and James de Bunsen, who took over management of the trust 18 months ago, wrote in its final results for the year, that the turnaround process from deep value investor, to owner of a selection of good quality specialist and alternative asset was now 18 months away from completion.
“The Company delivered share price and NAV total returns of 3.0% and 1.6% respectively during the year” But the managers added: “We expect performance to improve steadily to acceptable and sustainable levels as the restructuring reaches completion and the new portfolio matures.
This performance comes in the context of a return of 11.9% from its benchmark, the FTSE World Index. But, it said, one of the main reasons for this is the Trust’s significant weighting to emerging markets, which didn’t rise as strongly as some developed markets, in particular, the US.
That said, the trust did manage to deliver a far higher investment income than the previous year and, as a result, the board announced that it will double the trust’s dividend to 3p, in 2014.
Portfolio construction
While at the year-end the Trust held 58 investments, the managers said, the aim at the end of the restructuring would be to hold approximately 40 “high-conviction” holdings, made up of two tranches: core holdings, which will make up roughly 75% of the portfolio, and tactical selections, which will aim to take advantage of shorter-term, sector-specific opportunities and special situations.
“It is imperative that we focus on funds with good quality assets, by which we mean assets with genuine growth and income potential and, ideally, good defensive characteristics,” the managers said.
“We are becoming increasingly positive about the outlook for the Company for a number of reasons. For example, our new purchases are performing satisfactorily even though, in some cases, they have yet to complete their own capital deployment programmes and are therefore not yet contributing their full target return.
“We also continue to identify a good flow of new investment opportunities and have made three more good-quality investments in the private equity, hedge fund and property sectors since the year-end,” they added.
