Henderson Asian Growth curbs gearing until conditions improve

The recently-renamed Henderson Asian Growth trust will scale back its use of gearing after the portfolio’s underperformance in 2011.

The financial report to December 31 shows the trust’s share price total return dropped by 23.1% and the net asset value total return declined by 23.3% over the 12-month period.

In comparison, the MSCI All Country Asia ex-Japan Index benchmark fell by 16.5% while the peer group declined by an average of 15.2%.

David Robins, chairman of the £281.1m trust, attributes some of the year’s underperformance to stock selections in Hong Kong, India, Singapore and Taiwan as investors looked for defensive earnings rather than growth.

“Moreover, this underperformance was exacerbated by gearing of 10% to 11% being maintained during the severe market declines over the summer,” he writes in the report.

The trust’s board is satisfied that manager Andrew Beal is working to address the areas of stock selection that have hampered performance but has taken steps to address the amplified volatility caused by gearing.

“As a result, gearing will in future be neutral other than at times when there appear to be clear turning points in regional markets,” Robins explains.

The Henderson Asian Growth trust ended 2011 with gearing at 4.1%. According to the Association of Investment Companies, gearing currently stands at about 3%.

The fund, which trades at a discount of 9.8%, was renamed from the Henderson TR Pacific Investment trust on March 1 to better reflect “the style and purpose of the company”.