Henderson Diversified Income Trust – Soft landing likely…
…but caution is required. The managers of Henderson Diversified Income (HDIV) stuck to their guns in the face of a consensus view of rising interest rates and inflation. This stance, and their focus on high-quality credits, has been rewarded in 2019, as central banks around the world have cut interest rates to tackle a slowing economy and investors fear a global recession. HDIV is the top-performing fund in the debt – loans and bonds sector, but perversely, is trading at a smaller premium than some of its competitors.
HDIV’s managers think that the bond market may not have peaked yet. However, they are concerned about the loan market (an area that they have been deliberately avoiding), and the market for securitised loans in particular (an area that HDIV has never had exposure to). The allocation to investment grade bonds has been increased.
High income from a flexible fixed income portfolio
HDIV’s objective is to seek income and capital growth such that, on a rolling annual basis, the total return on the NAV exceeds three-month sterling LIBOR plus 2%. It invests in a diversified portfolio of global assets including secured loans, government bonds, high yield (sub-investment grade) corporate bonds, unrated corporate bonds, investment grade corporate bonds and asset-backed securities. The trust may also invest in high-yielding equities and derivatives. Gearing (borrowing and synthetic – see page 8) is used to enhance returns.
Dividends, which make up the bulk of returns for investors, are paid quarterly.