James de Bunsen and Pete Webster, Co-Fund Managers of Henderson Alternative Strategies Trust, explain how their position as multi-asset managers can benefit investors, particularly during periods of market uncertainty. They also describe the Trust’s performance over the last six months and why the team has chosen to reduce the number of holdings in the Trust’s portfolio, along with what can be expected for the remainder of the year.
Q: Hello and welcome to the latest video update for the Henderson Alternative Strategies Trust. Today I'm joined by Co-Managers James de Bunsen and Pete Webster. Guys thanks for joining me today.
So Pete, first off, let's start by looking at the number of holdings in the trust. The number has gone down a little bit from the end of January where it was about 53 to now about 47. What can you tell me about those? Were they opportunistic sells or were they very deliberate moves?
A: So, there are a couple of reasons why the number of holdings have fallen this year. When we inherited the fund there were quite a lot of holdings with zero or very little value attached to them and we've had a very successful period in actually getting rid of a few of these holdings and fulfilling liquidation processes. So a number of stocks have fallen out of the portfolio for that reason.
The second reason is that this year we have done a bit of a review of the portfolio and have found a couple of stocks that haven't performed that we feel don't really meet the mandate’s rationale. So we believe both Polar Cap Global Financials and Biotech Growth Trust are investments that our investors can get access to themselves. So we've sold these positions and we've built up a little bit of cash in the portfolio as a result.
Q: Thanks Pete. Now James it's been a pretty difficult time for investors at the moment, there's a lot of market uncertainty but as multi-asset investors it gives you access to a universe with an array of opportunities. So what is it that you can access or you can find that your traditional equity investor can't?
A: Yeah I think there are a couple of areas that we've been adding to recently in credit markets and in the property market. In terms of credit we've bought a fund which mainly invests in investment grade floating rate bonds, but is a structured credit fund, so slightly more esoteric; there's a kind of complexity premium to it. We've allocated some capital to a specialist credit manager based in New York, the fund yields about 7% and these bonds have a very, very low default rate historically. So we think it's a good investment, a bit of capital appreciation potential as well. So that's an area we like.
And then in the property sector in the UK we think the industrial sector has still got some good value. And that's particularly focused on the sort of warehouse segment. This is a play on the rise of e-commerce and the fund that we're in, which is called Urban Logistics, that basically buys warehouses around big urban centres close to motorways and that's a key part of the whole logistics chain that is plugging into the whole growth of e-commerce.
And we also actually think that German property still is a very good story. There is a structural supply demand mismatch; very strong labour market growth and you can also borrow very, very cheaply in Germany because rates are so low in the Eurozone. So the yields are still attractive, debts are very cheap, that's a good mixture in the property sector.
Q: Lastly, Pete, how would you describe the Trust's performance over the last six months and what would you reasonably expect going forward?
A: At the end of May the fund’s NAV was up 4.6%. We have lagged below equity benchmarks but we believe that is a result of how well we held up in the volatility of the fourth quarter. We've also faced a couple of stock specific issues mainly from Riverstone Energy Ltd and Ceiba, the Cuban property owner and developer.
These stocks have both been impacted by the political instability in terms of ‘Trade War’ rhetoric and slowing global growth hitting oil prices; and possible increased sanctions against Cuba from the US, in the case of Ceiba. Going forwards we believe investors have probably seen most of the returns they will see for 2019 and the second half of 2019 will be characterised by lower returns. As a result, the portfolio is positioned very defensively. We are looking to protect capital at the moment and we believe we may get some opportunities to add more risk and more attractive valuations than we see today.