(Alliance News) - Henderson Alternative Strategies Trust PLC on Tuesday reported a significant drop in net assets over the first half following the sharp drop in the value of its investment in AIM-listed Burford Capital Ltd.
At September 30, the trust's NAV per share stood at 333.43 pence each, down slightly from 335.46p at March 31.
Henderson Alternative's net assets fell 62% to GBP10.3 million from GBP16.7 million six months earlier. The trust's total assets minus liabilities slipped slightly to GBP129.0 million from GBP129.8 million over the same period.
Henderson Alternative did not pay an interim dividend, but including the last year's final dividend of 2.5p, which was paid in the period, the trust's NAV total return in the first half was 0.1%. The FTSE World Total Return Index, the company's benchmark, gained 10.6%.
The trust said it is reverting back to paying an annual dividend.
"The company's equity benchmark is not an ideal comparator and a more appropriate reference point may be the average return of 4.6% achieved over the same reporting period by the AIC Flexible Investment Trust sector in which your company sits," the trust added.
Chair Richard Gubbins continued: "Performance for the period was impacted significantly by the well-publicised 'short-attack' on our holding in the listed litigation funding business, Burford Capital, and by a marked deterioration in the outlook for Riverstone Energy, a listed investor in oil and gas. Despite these significant setbacks during the period within our public equity allocation, the portfolio delivered good performance elsewhere, notably in its private equity portfolio."
Short seller Muddy Waters Capital LLC in August targeted Burford, calling it "a poor business masquerading as a great one" and "arguably insolvent".
On August 6, Muddy Waters tweeted that it would announce a new short position the next day but without disclosing the name of the company it would short. Then, on August 7, Muddy Water tweeted a link to its report on Burford.
Burford's share price fell 19% on August 6 and another 46% on August 7. Burford replied in September saying an investigation identified evidence of share price manipulation in the form of spoofing and layering surrounding the report.
Fund Managers Alexander Barr, James de Bunsen and Peter Webster, from Janus Henderson, added: "Overall performance was impacted adversely by a number of stock specific issues, most notably in the Public Equity segment of the portfolio. The positive performance from the portfolio's largest allocation, Private Equity, was driven from both our listed and unlisted investments, albeit with common performance drivers, which include exits (for underlying portfolio companies) at or above current valuation levels.
Looking ahead, Gubbins said short-term political risks "persist".
He said: "It is against this backdrop the investment management team is developing its pipeline of alternatives investments. The private markets space (accessed via both listed and non-listed securities), one of several investment strands available through the company's multi-alternative remit, remains particularly attractive."
Shares in Henderson Alternative Strategies were 0.1% lower in London on Tuesday at 260.36 pence each.
By Paul McGowan; paulmcgowan@alliancenews.com
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Burford Capital (BUR)