Henderson adds protection to Managed Distribution

The managers of the Henderson Managed Distribution fund have added put options and a short equity index future into the portfolio on expectations of near-term pressure for stock markets.

Run by John Pattullo, Jenna Barnard and Trevor Green, the £343.3m portfolio has only recently been given the powers to use derivatives for investment purposes.

With the FTSE last week rising to a four-month high of about 5,500, the managers are looking to provide investors with some protection should the equity markets move lower once again.

Henderson Managed Distribution, which was formerly under the New Star brand, is split between fixed income and equities. It is allowed to hold a maximum of 40% in equities.

While the managers are cautious on the near-term prospects for equity markets, they are bullish on the longer view.

The Managed Distribution fund currently holds about 37% in equities.

“Many parts of the bond market, including gilts and parts of investment grade, look too expensive right now.

“However, we really like equity valuations, dividend yields look extremely attractive,” Pattullo says.

“We have been in this trading range for a while and equities may tail off as they have done after brief recent rallies. But once we get to November and December we believe equities could move much higher.

“In bond markets, we still see value in high yield, particularly as defaults have been largely non-existent. We have also been adding some secured bonds to our portfolios.”