Henderson Alternative Strategies delivered a NAV total return of -2.3% during the half-year to 31 March 2016 compared to a rise of 11.5% in its FTSE World Total Return Index global equity benchmark. The Chairman’s statement says that, whilst the company tends to outperform in testing markets (e.g. for the six-month period to 30 September 2015), it tends equally to underperform in rising markets. He thinks the extent of the recent underperformance is unsatisfactory, as is the fact that the fund made a negative absolute return.
The Board appointed Henderson as Fund Manager in April 2013 in order to address a preceding period of unsatisfactory investment performance and to reposition the company for future growth. In doing so, it considered it necessary to give Henderson sufficient time to complete its portfolio restructuring with a view to achieving attractive long-term returns for shareholders. The Board also recognises, however, that the company must now begin to demonstrate that performance is indeed improving and is sustainable longer term.
Henderson Alternative Strategies’ share price total return of -3.5% during the half-year did not reflect the company’s commitment to deliver stronger returns. The Board believes it is similarly clear that improved performance is required to increase demand for the company’s shares which, in turn, should help to reduce its persistent share price discount to NAV per share. During the half-year the discount widened slightly from 19.8% to 21.2%.
In January 2015 Henderson Alternative Strategies completed a tender offer for up to 10% of its ordinary shares. As announced previously, a second 10% tender offer will be made available to shareholders towards the end of 2016 if the company’s discount averages more than 10% during the financial year-ended 30 September 2016. It is now very likely that the second tender offer will take place.
Whilst the Board remains confident that the company’s restructured portfolio now has the potential to generate attractive long-term returns, it continues to regard improved near-term investment performance as Henderson Alternative Strategies’ key priority during the second half of the financial year. This is particularly important as the Board, Henderson and the company’s broker engage in further marketing activities over the coming months.
The Chairman goes on to says that it is now almost 18 months since shareholders gave Henderson Alternative Strategies the mandate to continue with its identified strategy. The company is therefore at a critical point as it strives to re-establish itself as a compelling vehicle for investors seeking exposure to a high-quality diverse portfolio of alternative asset and specialist funds. Although significant progress has been made towards creating such a portfolio, the Board is fully aware of the importance of engaging with shareholders regarding the company’s future direction if improved investment performance continues to be elusive during 2016. The Board will continue to keep under consideration other potential means of enhancing shareholder value, including additional discount control mechanisms.
The manager says there are a number of reasons why the company’s short-term performance diverges from its benchmark. For example, at the half-year 17% of the company’s total investments comprised unlisted holdings that reprice monthly, quarterly, semi-annually or annually. In addition, a further 5% consisted of illiquid listed investments that reprice irregularly. Another reason for short-term divergence is that some of the most significant areas of investment focus, such as specialist credit funds and long/short absolute return hedge fund strategies, exhibit limited correlation to global equity markets. There is not much information though on the specific reasons behind the underperformance.
HAST : Henderson Alternative Strategies Board keeping close eye on performance