Investors have cooled on the top-performing Henderson Opportunities Trust (HOT ) after a difficult year that saw the fund punished by the impact of the Brexit vote.

The James Henderson-managed fund boasts the best five-year record of any UK All Companies investment trust, with the shares up 172.4% over that period.

But the last year has been tough, with Henderson (pictured) admitting in the trust’s final results that the 12 months to the end of October had been ‘disappointing’.

Over that period the net asset value rose only 0.4%, while the shares lid 7.5%, as the discount widened, reaching a high of 23.3%, although it has since recovered to 15.4%.

Chairman Peter Jones said ‘market nervousness’ post-EU referendum was to blame for the underperformance, ‘and our vulnerability to Brexit sentiment has probably been exacerbated by the UK focus of many of our investments, and the fact that the company did not enjoy much of the benefits of foreign currency movements’.

Numis analyst Sam Murphy said HOT was the most volatile and risky of manager James Henderson’s trusts – he also manages Lowland (LWI ) and Law Debenture (LWDB ).

‘[The trust] is reserved for [Henderson’s] highest conviction stock picks, as shown by the portfolio composition by index versus the FTSE All-Share benchmark, with a skew towards smaller companies and Alternative Investment Market stocks,’ said Murphy.

He gave the example of Blue Prism (PRSMB), which specialises in white collar job automation, and rallied 293% over HOT’s financial year.

Henderson, who runs the trust alongside Colin Hughes, said the focus had remained on ‘smaller initial public offerings (IPOs)’ over the past year and that they had ‘avoided many of the high profile larger offerings where we simply did not see value or growth’.

During the year, the trust was active in 78 companies, starting new positions in 17 and selling out completely in 20. Of the new investments, 10 were IPOs.

The top five contributors to the portfolio were Blue Prism, followed by software business Micro Focus (MCRO), which Henderson expected to be boosted this year by the acquisition of HP Software.

‘This transaction will complete later in 2017, so we expect the shares to consolidate until the significant benefits are more visible,’ he said.

Even though Henderson sold out of miner Glencore (GLEN) it was still the third largest contributor to the fund. This was followed by translation services company RWS (RWS) and video games services company Keywords Studios (KWS).

The biggest drag on performance came from Oxford Pharmascience (OXP), where it became clear ‘that the trials process will be much longer and more costly’ than hoped, said Hendeson.

‘The company is well funded but timelines have shifted materially out,’ he said. ‘We decided to sell part of our position to recycle the money into better ideas.’

Vertu Motors (VTU), the UK’s fifth largest motor retailer, traded well but has been hit by market concern over consumer sentiment. Hvivo (HVO), provider of bio-medical services, ‘saw its market retract as large pharma clients diverted resources to tackle the Ebola outbreak’, said Henderson.

‘It shifted its strategy to encompass more investment in its own product portfolio and this has raised the annual cash burn,’ he said. ‘We have reduced our exposure.’

Energy support services company Lakehouse (LAKE), which the managers had ‘great hopes for’ also detracted from the portfolio as it ‘took on business it had little experience of and inevitably paid the price’, said Henderson.

IP Group (IPO), which partners with universities to exploit new innovations, also had a ‘disappointing year’ and a ‘hoped-for IPO of its largest investment, Oxford Nanopore, has not year happened and investors have become more adverse to risk’, said Henderson.

Henderson said the outlook for the UK economy was as ‘uncertain as ever’ due to the ongoing Brexit debate and that company directors had ‘adopted a more cautious approach, at least in the near term’.

‘On the positive side, higher interest rates may actually be beneficial for equities if it is the consequence of higher investment and real growth,’ said Henderson.

‘Export orientated UK companies and those with earnings from overseas should benefit from lower sterling and there are a number of these, such as e2v Technologies (E2V), in the portfolio.’

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