Henderson debates Smaller Cos fee

The board of the Henderson Smaller Companies investment trust is considering adding a performance fee to the fund.

The board is still negotiating a revised fee arrangement with Henderson, which it reviews every three years. The group has not yet announced the proposed percentage of the performance fee or when it would take effect.

According to the manager of the trust, Neil Hermon, the addition of a performance fee would act to align the interests of the shareholders and the management.

Several investment trusts managed by Henderson already charge a performance fee, including the Eurotrust, TR European Growth trust, High Income trust and City of London trust. The board of the Henderson TR Pacific trust is also considering adding a performance fee at a later date, according to the group.

The Henderson Smaller Companies trust has posted a net asset value total return of 26.5% in the year to July 21, according to the Association of Investment Trust Companies. The board also recently proposed a final dividend payment of 1.15p per share for the year to May 31, up 15% on last year’s dividend payment.

According to Close Wins Investment Trusts Research, the Henderson Smaller Companies trust has 53% of its portfolio invested in mid-cap stocks and 32% in small-caps.

“The UK smaller companies market has had a couple of good years, but the factors driving outperformance have come to an end,” says Hermon (pictured). He adds that smaller companies are no longer cheaper than their large-cap counterparts and the outlook for the equity market in general is also more uncertain than in previous years. “It will be a tougher year going forward for British small-caps, but we do expect corporate activity to remain fairly strong.”

Within the smaller companies sector, Hermon adds that the trust is currently overweight in support services companies as well as construction and business-to-business publishing stocks. The portfolio continues to be underweight in insurance and general retailers. Top holdings include design company WS Atkins and specialist information provider T&F Informa.