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View the video online at http://citywire.co.uk/money/video/a530693
Welcome to the ‘Twilight Zone’ of the London Stock Exchange
Harmesh Suniara, manager of Henderson Fledgling Trust, explains how stocks end up in the FTSE Fledgling index, and how his trust seeks to gain from their recovery stories.
Most investors are familiar with the FTSE All Share and the Alternative Investment Market. But who really knows much about the ‘Twilight Zone’ that sits in between, the FTSE Fledgling Index?
In a Citywire video interview, Harmesh Suniara, manager of Henderson Fledgling Trust, explains how stocks end up in the smaller companies index, and how his investment trust seeks to gain from the recovery stories among them.
‘The companies that fall into the fledgling index have already hit upon hard times,’ he says, pointing out that in some cases their shares may have already lost as much as 90% of their value.
Although a number of those firms do go bust, he says, ‘the majority spend their time in that index – and something happens ... where they go into cash-generating mode'.
Suniara’s comments follow a brutal third quarter for UK equities, suffered amid fears over global growth and Europe’s debt crisis.
He also says the Bank of England’s plan to pump another £75 billion into the UK economy could translate into ‘better confidence in the corporate world’. But the manager warns that ‘what the market really wants to see’ is the eurozone launching a similar programme involving ‘large numbers’ that would safeguard the region’s banks.
In the past three years, the £65 million trust’s net asset value (NAV) has surged 59%, outperforming its benchmark index, as its share price took on 71%. The shares trade at a discount of 8.1% to the trust’s NAV, somewhat narrower than their average discount of 13.5%.
1 comment so far. Why not have your say?
Christopher
Oct 09, 2011 at 09:26
From conversations I find bank finance a huge priority and problem for small companies. Recent stories - first hand - include a profitable small business supplying to trade customers employing 8 whose business is rather lumpy and has had for years an overdraft of £2000 for flexibility; cancelled with an apology from his bank manager but no reason - result reduce overhead by £4000 per month, read sack one employee and have his wife work part time for no pay to fill gap. Or small but profitable buy to let company told its bank's minimum corporate/property loan is now £1.5 million. Result no loan so one less seller finds a buyer, one less tenant finds a home. And don't think that tenant could go out and buy; he would also need a hard to come by loan.
Of course it is easy to say that in any one case an alternative solution could be found, but I believe it is a duty of the banks, in return for the protected position they hold and will hold under the new regime, to circulate small sums of money back into the economy of small or privately owned businesses to enable them to provide the goods and services and employment we need.
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