Fund Manager commentary - Henderson Alternative Strategies Trust



​Macro Backdrop

Global equities remained volatile in November but ended up 1.5% in US dollar terms and 1.6% in sterling terms. Emerging markets led the way, followed by the US and Japan, whereas European and UK equities saw modest declines. Healthcare was the leading sector globally, followed by real estate and the newly revamped communications sector. The 22% decline in the price of oil meant that the energy sector was the largest faller.

Government bond yields were broadly lower (and prices higher) with US Treasuries seeing the largest fall among the major markets. Credit spreads (versus equivalent government bonds) widened over the month across both investment grade and high yield bond markets. Euro-denominated high yield debt was particularly affected as the spread widened over 0.7%. Hard currency emerging market debt suffered small losses but the local currency equivalent saw gains as the underlying exchange rates improved. Within commodities, industrial metals and agriculture rallied but the drag from the energy complex more than offset this. Major currencies were little changed.

Market volatility continued, with the on-going trade tensions and plunging oil price impacting both equity and fixed income markets.  The Italian budget situation also remained a source of investor concern as Italian 10-year government bond yields moved back above 3.5%. Federal Reserve (Fed) Chair Powell gave a dovish signal to markets, commenting that interest rates are just below the level that many estimate to be ‘neutral’ –this suggests that there may not be as many hikes to come as some had thought. This buoyed equity investors and also resulted in a rally in US Treasuries. The end of November was dominated by speculation about the G-20 summit in Buenos Aires, in particular the meeting  between Presidents’ Xi and Trump of China and the US, respectively. The announcement of a 90-day ceasefire on the further escalation of tariffs, as well as some other commitments, was well received by investors.

Unless otherwise stated, returns are MSCI Indices expressed in local currency terms. The return for the UK equity market uses the FTSE All Share Index in local currency terms. 

Fund performance 

Over the month of November the fund’s Net Asset Value (NAV) gained 0.5% whilst the share price return was 1.1%.  Over the same period the Company’s Association of Investment Companies AIC Flexible Investment peer group returned -0.7% in share price terms (Source:Morningstar). The FTSE World Index, which the Company aims to outperform over the long-term, returned 1.4%.  

As disclosed in the interim results we have reclassified our investments into six categories.  These categories are private equity, public equity, credit, hedge funds, property and commodities.  The private equity sector was the dominant driver of return in November.  An update from Mantra Secondary Opportunities I (“Mantra”) highlighted that the position continues to perform strongly.  During the second quarter Mantra’s TVPI (Total Value to Paid In) multiple expanded from 1.63x to 1.83x.  We are further encouraged by the significant realisations taking place within Mantra’s portfolio.  The DPI (distributed to paid in) multiple at the underlying level now stands at 0.5x.  The position contributed 0.9% to performance.  Riverstone Energy Ltd was the biggest detractor in the private equity sleeve as oil prices fell sharply during the month.  Riverstone Energy Ltd fell 4.2% during the month and detracted 0.2% from NAV.    

The public equity allocation within the portfolio added 0.2% to fund performance.  Performance within the sleeve was primarily driven by the funds’ healthcare exposure with The Biotech Growth Trust plc and Worldwide Healthcare Trust PLC contributing 0.1% and 0.2% respectively.         

The sector detracting the most from performance during the month was the commodity allocation.  The BofaML Commodity strategy is the only current position in the commodity sleeve and detracted 0.4% during the period.  The strategy takes long and short positions in commodity futures with the aim of generating attractive, uncorrelated returns.  The strategy can be negatively impacted by supply shocks that cause spot prices to rise sharply.  This is what happened in November in the natural gas market.  Historically as fears over supply shortages recede the strategy tends to perform strongly.  We have seen this reversion take place in December with the strategy up 5.8% at the time of writing (12th December).

Turnover in the portfolio was light during the month.  We exited our position in Tetragon Financial Group Ltd (“Tetragon”) in full.  The rationale behind closing this position was the fact that we see little sign of its sustained discount closing.  The sale also reduced the fund’s exposure to leveraged credit sectors.  Finally we have long held the view that the asset management business is held at an attractive valuation but we see little sign that it will be exited in the near term, realising this value.                   


We believe that the current market volatility will continue into 2019.  In our minds 2017 was the exception rather than the rule and we believe 2019 will be much like 2018 with higher levels of volatility and lower returns.  Whilst we note that valuations have fallen recently we observe that they are not cheap and we would expect them to fall as the economic cycle enters its latter stages and investors start to price in the next recession.  We believe that investors will need to diversify and seek alternative sources of return going forward and that the fund is setup well to provide such exposure.                    

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.

For promotional purposes.

Important information

Please read the following important information regarding funds related to this article.

Henderson Alternative Strategies Trust plc

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which investment products and services are provided by Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each registered in England and Wales at 201 Bishopsgate, London EC2M 3AE and regulated by the Financial Conduct Authority) and Henderson Management S.A. (reg no. B22848 at 2 Rue de Bitbourg, L-1273, Luxembourg and regulated by the Commission de Surveillance du Secteur Financier). We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Specific risks

  • Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
  • 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.
  • The trust may have a particularly concentrated portfolio (low number of holdings) relative to its investment universe and an adverse event impacting only a small number of holdings can create significant volatility or losses for the trust.
  • The trust could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the trust.
  • 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.
  • Global portfolios may include some exposure to Emerging Markets, which tend to be less stable than more established markets and can be affected by local political and economic conditions, reliability of trading systems, buying and selling practices and financial reporting standards.
  • 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.
  • Where the trust invests in assets which are denominated in currencies other than the base currency then currency exchange rate movements may cause the value of investments to fall as well as rise.
  • 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.
  • In certain circumstances the investment manager may not be able to sell investments from the trust's portfolio. This could have a negative impact on the overall performance of the trust.

Risk rating


Important message