Fund in focus: a play on British mid-caps

Don’t be fooled by the name – Henderson Smaller Companies Investment Trust (LSE: HSL) is more of a play on UK mid-cap shares than a fund for those looking to profit from penny stocks. Cambridge mathematics graduate Neil Hermon has been running the fund since 2002, and it currently has around two-thirds of its holdings in the FTSE 250.

Not that that’s done it any harm. The trust is a solid long-term performer – over ten years it’s the third of 13 investment trusts in the UK Smaller Companies sector, according to Citywire, returning just over 280% across that time. The results are similarly strong over three (94.3%) and five years (156%) and it has consistently beaten its benchmark.

Outsize bets on the housebuilders have been one major factor in the trust’s recent performance, with the sector buoyed by low interest rates and government support, Hermon tells Leonora Walters in Investors Chronicle – Bellway remains his top holding. He’s also looking at picking up promising-looking oil companies while the sector is in the doldrums. Companies he likes in the area include Premier Oil, which is “financially sound” despite “reasonable levels of debt”, and Cairn Energy, which he likes because of its “strong balance sheet with a substantial net cash position”.

The ongoing charge is 0.88%. That’s made up of a 0.35% management fee plus a performance fee of 15% of any outperformance of the benchmark, with total fees capped at 0.9% of average net assets over the year. It currently trades on a discount to net asset value (in other words, you can buy the underlying portfolio for less than it’s worth) of around 7.5% (though note that this is a relatively narrow discount compared to the past). It also pays a dividend yield of around 2%.

Henderson Smaller Co’s top ten holdings
Holding % of assets
Bellway 3.7%
E2V Technologies 2.7%
Paragon Group of Companies 2.2%
Howden Joinery Group 2.2%
Informa 2.1%
Interserve 2.0%
NMC Health 1.9%
WS Atkins 1.9%
Victrex 1.9%
Playtech 1.9%

Leave a Reply

Your email address will not be published. Required fields are marked *