Henderson High Income Trust (HHI) launched in November 1989, with an objective of generating a high income from a portfolio consisting primarily of UK equities complemented by a modest weighting in fixed interest investments that have been used to enhance income…. Read more
Investors might have been forgiven for thinking that the second half of HHI’s objective, “maintaining the prospect of capital growth”, might fall by the wayside. However, by making imaginative use of the flexibility afforded by its investment trust structure, over the past 30 years, HHI has been able to deliver on both parts of its objective. Total returns have been well ahead of the wider UK market; over 14x since launch, compared to 9.4x from the MSCI UK Index.
The puzzle is that, despite an excellent long-, medium- and short-term record and a very attractive yield, the trust is trading at a discount. This is arguably more a reflection of anti-UK sentiment, which might improve soon, than any perceived problem with HHI.
High income from a diverse UK equity income portfolio
HHI invests in a prudently diversified selection of both well-known and smaller companies to provide investors with a high income stream while also maintaining the prospect of capital growth. Gearing (borrowing) is used to enhance income returns, and also to achieve capital growth over time. A portion of gearing is usually invested in fixed interest securities, which helps dampen the overall volatility of the trust.
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