Investment trust insider on Henderson Diversified Income – James Carthew: Henderson Diversified banks big bond gains from Covid bargains
This week I want to spotlight Henderson Diversified Income & Growth (HDIV), whose fund managers John Pattullo and Jenna Barnard recently updated investors following the investment trust’s annual results last month.
These showed the £161m closed-end fund generated a 13.5% total investment return in the year to 30 April, although shareholders got 10.7% as the discount on the share price widened, with the trust currently 9% below net asset value. Dividends were maintained at 4.4p with the managers confident they were secure.
This time last year the yield on US 10-year government bonds, or Treasuries, was about 0.6%. Fearful of a wave of bankruptcies in the wake of the pandemic, interest rates had been slashed, quantitative easing – central bank buying of bonds to drive prices up and yields down – restarted, and vast quantities of stimulus was injected into the US economy in the hope of shoring up demand for goods and services. A similar pattern was seen in Europe and the UK.
The good news on vaccines last November offered the hope of an eventual return to a more normal economy. However, by February 2021, investors were starting to worry about the economic effects of all that stimulus and it was becoming obvious that inflation was ticking upwards. Long-term interest rates rose and, over the next few months, yields on 10-year Treasuries were often over 1.6%, peaking at over 1.7%
Then concern started to build that the emergence of new, more infectious variants of Covid-19 would delay the full reopening of the economy and dampen both growth and inflation. Ten-year yields fell again and are currently about 1.25%.
All of these yield numbers are low, but…. read more here