Henderson is to permit its flagship UK Absolute Return fund to double the amount it can hold in international stocks, a move that may ease concerns about the growing size of the strategy.
The UK equity long/short fund is popular among the fund selector community. The UK-domiciled version has £1.8bn in assets and the total strategy, including offshore versions and institutional mandates, now exceeds £5.5bn in size.
The vehicle currently has a 20 per cent cap on international stock exposure – as of this month it held an 18.5 per cent weighting to non-UK stocks – but Henderson has moved to give managers Luke Newman (pictured) and Ben Wallace more room to manoeuvre.
The change in investment policy will come into force on November 1, and comes at a time when the fund’s capacity has been under scrutiny.
In January, Mr Newman said the product had a notional capacity of $6.5bn to $6.7bn (£5.3-5.5bn), based on the ability to liquidate 80 per cent of the portfolio in 10 days. This level was reached in April but the fund remains open for investment. Expanding the strategy’s international remit could boost the portfolio’s liquidity.
The fund was originally soft-closed in November 2011 when assets reached $2bn. It reopened in June 2013, a move Mr Wallace said was due to an increase in stock dispersion that had allowed the managers to put more capital to work.
A Henderson spokesperson said the strategy’s use of international long and short positions had helped the fund, particularly in times of equity market and currency volatility.
“The investment policy for Henderson’s UK Absolute Return strategy will be amended to allow the managers to invest up to 40 per cent in companies listed outside of the UK,” the spokesperson added.
“The revised investment policy has received FCA approval, is consistent with the investment strategy and will not result in any material change to the overall risk profile of the fund.”
Henderson stressed the 40 per cent limit was not a target for the managers.
The UK-domiciled version of the Henderson UK Absolute Return fund has performed relatively well in 2016, returning 1.3 per cent year to date, and 17 per cent over three years, according to FE Analytics shows.
It has also been a beneficiary of absolute return products’ popularity this year, having seen an estimated £764m net inflows in the nine months to the end of September, Morningstar figures show.
