Henderson High Income (HHI), the only London-listed UK equity and bond income fund, has agreed a cut in the management fee it pays fund manager Janus Henderson as it strives to keep its costs in line with more numerous UK equity income rivals.
Backdated to 1 January, the 0.45% annual fee that was previously charged on gross assets including borrowing will switch to adjusted net assets that exclude gearing which stood at 17.5% at the end of December.
Chair Jeremy Rigg said the change was to ensure the £309m investment trust remained competitive on costs, particularly in relation to UK equity income trusts. The average annual ongoing charge, including management fee, in the 17-strong sector is 0.55%, according to the Association of Investment Companies (AIC) website.
The news came in annual results showing the 5.9%-yielder essentially matched its benchmark with a 20.4% underlying investment return in 2025. The closed-end fund ended the year with 89% in equities and 11% in bonds. The benchmark, which has an 80:20 split between shares and bonds, rose 20.4%.
Fund manager David Smith said this was below the 24% of the FTSE All-Share index because bond prices had fallen as their yields rose during the year. The trust’s fixed income portfolio underperformed its bond benchmark with a 5.6% return due to positions in US bonds which he said had lagged their UK equivalents. The gearing, or borrowing, helped, however, as the UK stock market enjoyed its best year since 2009.
Shareholders saw a slightly higher total return of 22.6%, benefiting from the share price narrowing the gap, or discount, to the net asset value of the trust’s investments to 5.7%. This lifted five-year total returns to 73.5%, well ahead of the 55.1% benchmark return.
Smith said the portfolio benefited from big gains in British American Tobacco, life insurer Phoenix and fund manager M&G, although an underweight allocation to banks – holding HSBC, NatWest and Lloyds, but not Barclays – weighed on its relative performance.
Like other income funds, HHI didn’t hold low-yielding Rolls-Royce as the aerospace giant soared last year and was underweight in AstraZeneca when the UK drugs giant rallied in the second half after striking a deal on drug pricing with the US government.
Meat packager Hilton Food Group and contract caterer Sodexo also weighed on returns. Hilton fell as it struggled with inflation and an outbreak of listeria in its Greek salmon processing plant. Sodexo’s profits were hurt by the loss of key US contracts leading to a change in chief executive and Smith selling the position.
Good stock picks outside the UK included Nordic telecoms group Tele2 and French utility Engie which respectively rose on news of cost cutting and stronger trading.
Income into the portfolio rose 5% to 11.28p per share from 10.74p, flattered by one-off special dividends from companies. Excluding these, the income return increased by 2.2%. There were big payout rises from NatWest (42.8%), 3i Group (21.5%), Lloyds (14.8%) and Tesco (14%) which offset cuts of 66.7% and 16.8% by miners Anglo American and Rio Tinto.
This income covered the trust’s quarterly dividends whose total rose 2.8% to 10.9p per share from 10.6p. This is the 13th consecutive year of dividend growth for the company which ranks among the AIC’s “Next Generation Dividend Heroes”.
Our view
James Carthew, head of investment company research at QuotedData, said: “I am pleased to see Henderson High Income report a decent set of results and shift to calculating its fee on net assets. Basing the fee on gross assets provides the manager with an incentive to keep the gearing high (although I do not believe this was happening at HHI).”
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