Edison Investment Research Limited
Edison issues review on Henderson Opportunities Trust (HOT): A differentiated exposure to smaller companies

London, UK, 15 Mai 2024

Edison issues review on Henderson Opportunities Trust (HOT): A differentiated exposure to smaller companies

With a focus on long-term growth, Henderson Opportunities Trust (HOT) seeks investment opportunities across the breadth of the UK market. This includes a strong bias towards smaller and earlier-stage companies with significant potential to become tomorrow’s leading British businesses. There are tentative signs that the significant three-year underperformance of these smaller companies, and of HOT, may be coming to an end. If so, the trust is well placed to benefit and its differentiated, truly all-market approach is one that many investors would struggle to replicate. Moreover, HOT’s size and permanent capital base means that it can act nimbly in less liquid parts of the market and take a patient approach.

The margin by which overseas-oriented, often defensive larger stocks outperformed SMEs narrowed in 2023 and since October 2023, the start of HOT’s FY24, sensing a turn in the interest rate cycle, the NSCIAEX has outperformed. So too has HOT, with an NAV total return of 18.6%, 4.3% ahead of its broad market benchmark and 2.4% ahead of the NSCIAEX. It is uncertain whether the recovery in SMEs will be sustained, but valuations are low and the managers argue that a tough economic outlook is more than priced into share prices. They note that a recovery towards historical norms of profits and valuations would be a potent cocktail for returns.

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