Standing up to market challenges
David Smith, Portfolio Manager of Henderson High Income Trust, discusses the factors currently affecting the UK market, navigating concentration risk, and how consumers and businesses are dealing with rising costs. David also highlights why bonds are essential for diversification and provides his outlook for UK dividends.
- Despite the increased volatility in global equity markets, the UK market has been fairly resilient largely supported by solid performance from the mining and oil & gas sectors which have benefitted from surging commodity prices.
- Our ability to own bonds was beneficial from a diversification perspective since bond coupons are typically more resilient compared to equity dividends in big drawdowns or economic recessions. Though our bond exposure has been near historic lows, we’ve started allocating away from equities and into bonds.
- With consumers under pressure from the cost-of-living crisis, businesses that have set up their operations to be the low-cost leader can provide consumers with good value for money and could stand to benefit in this difficult market environment.
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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.
- All or part of the trust's management fee is taken from its capital. While this allows more income to be paid, it may also restrict capital growth or even result in capital erosion over time.