High yielder Henderson Diversified Income mulls switch to UK base for tax and cost savings


#1

Originally published at: http://whichinvestmenttrust.com/high-yielder-henderson-diversified-income-mulls-switch-to-uk-base-for-tax-and-cost-savings/

Legislative changes in recent years have eroded the benefits of being based offshore, and with the prospect of increased costs and risks, the board is considering moving domicile to the UK. Henderson Diversified Income Limited (LON:HDIV), a £160 million flexible Bond and Fixed Interest investment company, domiciled in Jersey, but with a base in Luxembourg,…


#2

One criticism of HDIV I have is dividend growth has been anaemic for the past few years but that is at a very high level. It’s had one of the most consistently high dividends across the fund sector.

The fact it can invest in this Senior Debt is one of its most important attractions for me because of that extra level of security that is amiss from a normal Bond fund. Guys who hold the ordinary Bond debt of indeed high yield would likely lose everything in the event of a default, whilst HDIV with its Senior debt would at least be cushioned if not fully protected.


#3

Whether you get your investment back or not with Senior Debt @buck depends on what the debt is secured against. If it is freehold property in a good location then the chances of a full recovery might be higher, depending on the value of the building versus the debt, but when it comes to plant and machinery then depreciation can deplete the value.

I remember seeing some data a few years back on recovery percentage in instances where senior debt went wrong and it was around three quarters, which is still very good actually. Non secured debt gets back little to nothing.

I wonder if the management team at Henderson will survive the merger with Janus in America. they have a strong bond team too though I rate the Henderson team pretty well.


#4

I’d be careful to think of senior loan funds as being secure, when the underlying businesses go belly up you can expect to lose something in normal circumstance.

Henderson Diversified Income is a fantastic little fund if you are looking for a high level of income because it is one of the highest you can find, and it has been a consistent performer too. Most of the return you make is in the form of the dividend however, so it’s not much use to growth investors.

I’ve held it for three years and I’ve more than happy with it. Another slightly different income fund I use is TwentyFour Income which invests in asset backed securities, like the Henderson fund though in a much higher proportion. They’re both good options for income seekers like myself.


#5

The surprising thing ought to be that there has been any growth at all considering that the level of income from the assets held is affected by interest rates. Perhaps this has been acheived partly by reducing the amount of loans held and increasing the holdings of riskier high-yield bonds?

HDIV is one of my ore holdings and the proposed change will be a pain in the :a: if it does go through as my holding is subject to tax: looks like I need to get my juggling act together :black_joker:


#6

It’s a core holding for me too @arkwelder but I’m not sure how I’ll be affected if it switches to the UK.

I really like its flexibility to invest in Senior secure debt.


#7

I think if it switches its domicile it is required to pay out all its income reserves @steve, if it has any, that might be a bit of a bonanza.


#8

I think if it switches its domicile it is required to pay out all its income reserves @steve, if it has any, that might be a bit of a bonansa.