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Henderson International eyes Establishment assets as Henry Thornton starts new fund

12 April 2019

Henderson International Income Trust in line for bump-up in assets after board of Establishment choose it as default roll-over option for shareholders ahead of its liquidation.

Henderson International Income Trust (HINT) is in line for a bump-up in assets after the board of Establishment (ET) chose it as the default roll-over option for its shareholders ahead of the investment trust’s liquidation.

Establishment, a small, Asia-focused global investment, announced in November it was looking to wind-down after members of the Thornton family, who own about 38% of the £42 million listed fund, indicated they wanted to sell.

It has been a poor long-term performer, generating a total return for shareholders of 129% over the past 10 years, well below the FTSE All Share’s 186% return and the 243% average gain in global investment trusts. Although it set out with a mandate to preserve shareholder capital, its net asset value (NAV) has been volatile, losing 18% last year.

Before November’s announcement the shares traded 18% below NAV, although that wide discount has halved since then as investors have anticipated an exit closer to asset value.

The shares have jumped another 10p or 4.8% to 218p today a boost for investors including Miton Global Opportunities (MIGO) and Capital Gearing Trust (CGT).

Despite Establishment's record, fund manager Henry Thornton, who has run the trust since its launch 17 years ago, is not hanging up his spurs. He is leaving his current firm Blackfriars Asset Management to Join Garraway Capital Management to launch a new Asia open-ended fund.

The VT Garraway Asian Centric Global Growth fund is the second option for Establishment shareholders who wish to remain invested. It will invest in equities, bonds and precious metal exchange traded funds under a team that will also include Malcolm Schembri, Tim Hall and Darran Goodwin.

The third option for shareholders is simply to take their cash out.

As the default option, HINT might expect to get most of the money in Establishment. The £286 million global equity income trust has been run since its 2011 launch by Ben Lofthouse at Janus Henderson. He invests solely outside the UK in 50-80 undervalued companies paying good dividends.

Two years ago it got a bigger boost when Henderson Global Trust, a £128 million stable mate, took the unsual step of merging with HINT.

The trust pays quarterly dividends, yields 3.4% and trades at a small 0.5% discount. Its shares have provided a 67.1% total return over five years which beats the average 56.1% gain of global equity income trusts, according to Numis Securities data.

Janus Henderson has agreed to contribute 18 months of management fees on the money that switches from Establishment. This will be used to defray the costs to its existing shareholders from the transfer with any surplus going towards Establishment’s costs.

Establishment investors who opt for HINT will be issued new shares in the trust priced at NAV minus costs, also known as the ‘formula value’.

The proposals need Establishment shareholder approval at a general meeting. A circular for this will be published in due course, the company said.

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