Smaller Companies fund has suffered 48.2% NAV decline in the past 12 months
Investors in the Henderson Smaller Companies investment trust run by John Alexander are sitting on a 48.2% NAV loss over one year.
The trust, currently on a discount of 18.7%, has suffered due to its growth-oriented investment style.
Peter Cadbury, chairman of the £431.6m trust, believes the fundamental approach employed by the manager remains sound for the long term. This is despite underperformance against its benchmark over one, three and five years.
He said: 'The essence of our philosophy is the emphasis on growth, not on technology as such. We differ from others in taking a long-term view and running our winners. We will, however, be more ready to realise profits, especially when stocks enter the FTSE 100.'
The fall in NAV is far higher than any decline in the benchmark. The FTSE Small Cap ex investment trusts has fallen by 15.2% in the 12 months to 19 July, according to TrustNet data.
Over three years to 19 July, the index has risen 17.4% while the NAV of the trust has declined 26.6% and the share price has returned -28.2%.
Over five years, the share price has risen 0.9%, the NAV is up 7.5% but the index has gained 52.8%.
As of 31 May, the portfolio had a 52% exposure to the services sector with 32.7% in IT. The next largest sector was consumer goods at 7.2%.
Andrew Stack, deputy manager of the trust, said the managers were looking for growth companies within those areas of the economy that are displaying secular growth.
In recent years, this has meant a move away from the big manufacturers and retailers towards areas like services, technology and media, companies that are rich in intellectual property.
Stack said: 'The style adopted explains its performance in that in the later half of the 1990s it did very well but in 2000 and 2001 we have seen a de-rating in these companies, which has hurt the trust.
'The board reviews this process constantly and the feeling is that there is nothing wrong with this style and philosophy and, in the long-term, we believe it will deliver. We set ourselves out to deliver a way of accessing growth. By doing this there will be good and bad years but the board are comfortable with this and want to continue.'
Cadbury said that valuations overall have been considerably lower following the downturn in technology stocks, with the drop in performance as much due to overvaluations last year as revaluations during more recent times.
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