Investors in the Henderson High Income trust could see ongoing charges fall as it merges with the Threadneedle UK Select trust.
Back in March, the board of the £47m Threadneedle investment company announced the trust would be wound up, with shareholders being given the option to either cash-in their investments, or roll into Henderson’s High Income (HHI) vehicle.
Speaking at the annual general meeting yesterday (9 May), the Henderson High Income trust manager David Smith said there could be potential benefits for existing investors.
“The merger should lower our ongoing charge ratio; if we become a bigger trust then the fixed cost is shared over a larger capital base.”
He also said the scheme should improve the liquidity of shares because there will be more shares traded in the secondary market.
Unfortunately it was the disappointing stock selection within the equity portfolio which dragged down performance.David Smith“The board recognised the need to grow the trust and this transaction with Threadneedle means existing shareholders can increase their investment in the company in a cost-effective manner.”
But Mr Smith stressed that otherwise the move will not impact existing investors in the £217m trust, with the cost of the scheme being covered by Henderson.
The fund manager also outlined why the trust underperformed its benchmark in 2016.
Over the past year, the Henderson High Income trust has returned 18.6 per cent, lagging behind the UK Equity & Bond Income sector, which has returned 21.6 per cent over the same period, figures from FE reveal.
“Unfortunately it was the disappointing stock selection within the equity portfolio which dragged down performance,” Mr Smith said, pointing to “two key issues”.
He said the benchmark is heavily weighted to the mining sector, which made a sharp recovery last year.
However, he pointed out that most mining companies cut their dividends in 2016, making it hard for him to justify buying more shares in the sector.
Mr Smith also said Brexit dented the performance of his UK holdings, with shares in mid-cap stocks falling sharply back in June.
“While the UK economic growth has proven relatively robust, it is starting to slowdown now, so we are waiting to see the impact that has after the Brexit negotiations.”
katherine.denham@ft.com
