Finding value in UK small caps
James Henderson, Portfolio Manager of Henderson Opportunities Trust, talks about the Trust’s performance over the first half of the year, areas where he is finding opportunities, and how smaller businesses are innovating to deal with changing consumer behaviour. James also touches on the longer-term investment themes playing out in the portfolio.
- It’s been a challenging period for the Trust as smaller companies have struggled in the face of higher inflation, economic uncertainty, and rising input costs. However, the larger mature companies within the portfolio “stabilisers” have performed well and helped offset some of this weakness.
- During difficult market environments – such as stagflation – companies with strong pricing power, solid balance sheets, lower debt levels, and experienced management teams tend to be more resilient.
- Over the long-term, strong growth tends to come from small and medium-sized companies. Though their performance can be volatile, they also tend to bounce back stronger following difficult periods or large equity drawdowns.
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Please read the following important information regarding funds related to this article.
- If a trust's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio diversified across more countries.
- Some of the investments in this portfolio are in smaller companies shares. They may be more difficult to buy and sell and their share price may fluctuate more than that of larger companies.
- This trust is suitable to be used as one component in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this trust.
- Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
- The trust could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the trust.
- Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
- The return on your investment is directly related to the prevailing market price of the trust’s shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the trust. As a result losses (or gains) may be higher or lower than those of the trust’s assets.
- The trust may use gearing as part of its investment strategy. If the trust utilises its ability to gear, the profits and losses incured by the trust can be greater than those of a trust that does not use gearing.