Henderson High Income impresses in 2015

Henderson High Income generated an NAV return of 7.6% over the year ended 31 December 2015 while its benchmark, 80% of the FTSE All-Share Index (total return) and 20% of the Merrill Lynch Sterling Non-Gilts Index (total return), returned 0.9%. The return to shareholders was 6.6%. The dividend was increased from 8.6p to 8.9p.

This was the first year that the portfolio has been managed by David Smith (pictured) rather than Alex Crooke.

The equity portfolio returned 7.9% compared with the FTSE All-Share Index gain of 1.0%. Commodity prices continued to fall during the year, which significantly impacted both the oil & gas and mining sectors. The portfolio’s limited exposure to both sectors aided relative performance. Holdings in Moneysupermarket.com, Hilton Food and housebuilder, Galliford Try contributed positively to performance, with each company producing strong profit growth during the year. Elsewhere, the positions in the global satellite communication company, Inmarsat and Lloyd’s insurers Amlin and Brit were beneficial to performance. Inmarsat confirmed the successful launch of its latest satellite, creating the first global high speed mobile broadband network, and announced contracts to provide inflight connectivity to two major airlines. Both Amlin and Brit were acquired by competitors in the period, as the non-life insurance sector consolidated further given the pressure on premium prices.

The fixed income portfolio returned 4.8%, outperforming the 0.7% gain from the Merrill Lynch Sterling Non-Gilts Index. The portfolio’s exposure to corporate bonds of large, non-cyclical companies, such as US telecom, Verizon Communications, proved beneficial to performance. UK Government and investment grade corporate bonds significantly outperformed high yield bonds over the year, with the latter impacted by rising credit spreads in the mining and energy sectors, an area in which the bond portfolio has no holdings.