HENDERSON OPPORTUNITIES TRUST: Focus on AIM hits £77m trust

Mutual fund Henderson Opportunities is in a perfect storm – and until the UK economy improves there seems to be no escaping it.

The £77m listed trust has stood out for its focus on smaller UK companies – and particularly its focus on stocks listed on the Alternative Investment Market (AIM).

These AIM holdings make up half of the portfolio and collectively have impacted the trust’s overall performance. The result is unsavory numbers. For example, the fund has lost 16 percent over the past 12 months.

Over the last 12 months, Henderson Opportunities has lost 16%

Janus Henderson’s Laura Foll co-heads the fund with James Henderson.

She says confidence has been hit by three negative factors: poor sentiment towards smaller, domestically-focused UK companies; high interest rates (not good for the small, nimble growth stocks the fund likes to hold); and a general tendency among investment managers to steer clear of more illiquid UK equities.

Yet she refuses to be depressed. “This trust has 93 holdings.” It’s diverse, so there will always be winners and losers. The path to successful investment management is never linear, but running a mutual fund allows you to be a patient investor. As a manager, you are not forced to sell stocks. You can wait.’

According to Foll, there are encouraging signs in the broader economy that bode well for shareholders. She says inflation is declining — down to 6.8 percent for the year to July — as interest rates near their peak.

If a recession is avoided and household budgets improve, she believes this confidence will translate into improved sentiment towards UK equities and smaller companies in particular.

Some of the trust’s largest AIM-listed holdings have suffered a setback, including Zoo Digital and gas company Serica Energy

Although the environment is challenging, Foll says there are companies in the fund that are doing well.

For example, AIM-listed electronics retailer Marks Electrical, which has a 1% stake, recently reported a 30% increase in sales in the four months to the end of last month (y/y). Its shares have performed brilliantly — up 44 percent over the past 12 months.

“It’s a much smaller company than Currys,” says Foll, “but it’s more flexible, taking market share and growing. There are other companies out there that are in a similar growth mode and are braving the tough economic environment.”

Among them is mobile payments company Boku, whose share price has risen 35 percent over the past year. Foll calls these growth companies “tomorrow’s leaders” and they make up 70 percent of the portfolio.

The remainder of the fund is invested in what the managers refer to as “stabilizers” – large companies such as banks (Barclays, HSBC and Standard Chartered); consumer goods manufacturer (Reckitt Benckiser); and commodity producers (Rio Tinto).

Her job is to keep the fund on course, especially when sentiment towards UK smaller companies turns extreme. They’re also good providers of dividend income.

While the Trust’s goal is to provide shareholders with capital growth, it has increased income payments over the past 12 years.

Foll says the trust’s board is interested in keeping him [the dividend growth] go’. The dividend is paid quarterly and is 3.5 percent per year.

The trust’s market code is 0853657 and the stock ticker is HOT. Annual fees are 0.9 percent.