The level of debt deployed by the manager of the Henderson Smaller Companies investment trust in 2018 has contributed to a sharp underperformance in the year to 30 November 2018.
The trust lost 15 per cent during the period in question, compared with a loss of 10 per cent for the Numis Smaller Companies index in the same time period.
The manager, Neil Hermon, actually cut the level of debt, known as gearing, in the trust during the year from 8.5 per cent to 6.1 per cent, but the chairman of the trust, Jamie Cayzer-Colvin, said in his chairman’s report that the level of gearing had amplified the losses.
Despite the poor performance in total return terms, the dividend on the trust increased by 8.3 per cent.
Mr Hermon said: "The period under review has been a negative one for the UK equity market.
"The company's performance has been poor, with an absolute fall and underperformance compared to our benchmark.
"Equity market conditions remain difficult and the uncertainty over Brexit is leading to a reduced appetite for UK equities from international and domestic investors.
"However, in general, our portfolio companies are trading well, and are soundly financed and attractively valued."
Mr Hermon has managed the trust since 2002. Over the past fifteen years the trust has returned 647 per cent, compared with 425 per cent for the average trust in the AIC UK All Companies sector in the same time period.
david.thorpe@ft.com
