Henderson Alternative Strategies Trust has announced its annual results for the year ended 30 September 2015. During the period, the Company delivered a NAV total return of -5.0% compared with a 0.8% rise in its FTSE World Total Return Index global equity benchmark. However, the board say that they are very encouraged to see that in the second half of the financial year, the Company’s NAV total return outperformed this benchmark by 6.1%. Share price total return during the period was -10.8% reflecting a widening of the company’s discount to NAV during the period from 14.1% to 19.8%. The Board is proposing a 10% increase in the dividend for the year to 30 September 2015 to 3.3p per share.
The Board say that they are under no illusion that improved performance continues to be the Company’s top priority as it enters its new financial year and that this is key to a material and sustained re-rating of the Company’s shares and narrowing of its discount. In response to the Company’s high discount the board provided shareholders with a tender offer for up to 10% of the Company’s outstanding shares in January 2015. This was fully subscribed and returned a total of £12.8m at a discount of 2% to NAV less costs. A second tender offer is to be provided to shareholders if the Company’s discount averages more than 10% during the twelve months to 30 September 2016. The board have said that, if the second tender offer is triggered, it will be priced at a discount of 5% to NAV less costs.
In terms of portfolio activity during the period, the managers say that they sought to significantly increase the Company’s exposure to developed market assets and, where necessary, reduce emerging market and commodity weightings. They also looked to develop a number of our existing sector-specific investment themes, most notably with regard to the opportunities available in certain parts of both the private equity and floating rate loan markets. They also added to the company’s long/short hedge fund sleeve.
The new private equity investments included a £3.8 million position in Riverstone Energy (targetting targets the US shale oil and gas sector), a £6.5 million commitment to Mantra Secondary Opportunities (mature private equity partnerships at attractive valuations), £2.3 million invested in Apax Global Alpha (exposure to Apax Partners’ unlisted funds and £4.0 million in Princess Private Equity Holding (direct debt and equity investments across the large, mid- and small-cap buy-out markets, mainly in the US and Europe). Exposure to the floating-rate bank loan markets was increased through a new £4.0 million investment in Toro Limited, which invests in European collateralised loan obligations and other structured credit instruments. The company also added to its position in Blackstone/GSO Loan Financing Limited, which is focused on the European and US secured loan markets. Towards the end of the year the managers added to the Company’s hedge fund sleeve through a £4.1 million purchase of CT Invest Fund, an unlisted long/short European equity fund with a focus on pan-European large and mid-cap cyclical/industrial stocks. The managers also added to the existing holding in BlackRock European Hedge Fund Limited before it was closed to further investment.
In terms of disposals and redemptions, the managers redeemed the holdings in IP Value Brazil, a fund which invests in small and mid-cap Brazilian equities and Value Partners China Greenchip Fund Limited. Towards the end of the year a redemption notice was issued for the Company’s investment in Firebird New Russia Fund Limited (Russian and other Eastern European listed equities). With regard to commodities, the managers disposed of the Company’s holding in BlackRock World Mining Trust during January and February. In addition, City Natural Resources High Yield Trust was sold between January and June, as opportunities arose. Other significant activity included the redemption of the Company’s holding in SW Mitchell Small Cap European Fund, a long/short hedge fund, which was replaced with CT Invest Fund. Profits were taken on partial disposals of core holdings such as Oryx International Growth Fund Limited and Real Estate Credit Investments PCC Limited as liquidity in these tightly-held stocks became available.
In terms of performance, the largest contribution was provided by BlackRock European Hedge Fund Limited. Oryx International Growth provided the second largest contribution followed by Century Capital Partners IV L.P. The managers say that the prospects for CEIBA Investments Limited, the fourth largest contributor, improved against a background of a thaw in US/Cuban relations.
The company say that Two of the bottom five contributors were its holdings in the two share classes of Baring Vostok Investments Limited. This vehicle holds Russian private equity investments and the managers say that, whilst Russia has clearly been facing major headwinds, the underlying portfolio companies in the portfolio have generally held-up well but the weakness of the Russian Rouble has severely impacted the USD value of the Company’s holdings.
The managers say that the investment in NB Distressed Debt Investment Fund Limited – Global Shares was impacted by a sell-off in the US distressed debt sector towards the end of last year. However, the managers consider the medium-term prospects for this fund’s portfolio of distressed debt as fundamentally unchanged and positive. Ecofin Water and Power Opportunities plc was impacted by negative sentiment towards the energy and utility sectors. BlackRock World Mining Trust continued to suffer from the decline in mining and commodity markets and the Company’s holding was sold during January and February.
In terms of outlook, the managers say that, in their view, world equity markets continue to be plagued by uncertainty, above all, regarding global growth and the timing and quantum of interest rate rises. However, the managers say that they are aiming to construct a portfolio of alternative and specialist asset funds which, over the longer-term, can consistently outperform our mainly developed world equity market benchmark. The board say that, following two years of major change and restructuring, the transition of the portfolio is largely complete and that they expect the Company’s performance to improve steadily to acceptable and sustainable levels of long-term NAV growth.
Henderson Alternative Strategies sees performance pick up in second half : HAST