Henderson Diversified Income


#1

Originally published at: https://whichinvestmenttrust.com/diversified-income-henderson/

What is Henderson Diversified Income? The Company seeks to provide shareholders with a high level of income, and capital growth over the long term. The Company aims to deliver these outcomes by investing selectively across the full spectrum of fixed income asset classes including secured loans, high yield corporate bonds and investment grade corporate bonds.…


#2

Perhaps the observation that ‘…a high level of security…’ ought to be ‘…a higher level of security…’ - if the level of security was high then the loans would probably be rated as investment grade. Although loans might be secured, those assets must still be sold at a price that is high enough to cover that loan - something that might be more difficult in an environment where there are more sellers than buyers, whatever the asset. Along with many other investments, HDIV did take a ~55%-60% hit during the credit crisis.

However, I have held it since the IPO and it is one of my core holdings. And the closed-end nature should mean a safer way to hold high-yield bonds, too, because HDIV won’t be forced to sell these either.

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Note that as of 1st November 2014 the performance fee hurdle is +2% rather than +1.25%. Looks like a preformance fee that was designed for higher rates of 3month LIBOR that we have at the moment. Perhaps a fairer solution would be the introduction of either a high water mark or a cumulative hurdle. Let’s see if the Board has anything to say on the matter this time round


#3

This is probably my best discovery via the Witch investment trust site @arkwelder. I find the bond fund managers, to me, speak in gobbledygook which makes them more difficult to understand. English is not my mother tongue but I don’t think that is the reason I don’t get them because I am not stupid.

With HDIV I like that they can switch from bonds to senior secure loans depending on the economic environment.

I never knew, though I’m sure you did @arkwelder that investment trusts were able to switch between these different investments were as non investment trust bond funds can’t.