Fund Profile

Disclaimer

Disclosure – Independent Investment Research

This is independent research issued by Kepler Partners LLP. The analyst who has prepared this research is not aware of Kepler Partners LLP having a relationship with the company covered in this research report and/or a conflict of interest which is likely to impair the objectivity of the research and this report should accordingly be viewed as independent.

Overview
A new version of this profile is available. View Latest
Overview

The Herald Investment Trust (LON:HRI) is managed by Katie Potts, who, as a long-standing expert in the technology sector, aims to identify the most innovative global smaller companies within the telecommunications, multimedia and technology fields.

As discussed in the Portfolio section, Katie has the freedom to invest in anything from listed stocks with market capitalisations of below £50m, all the way up to companies with a £3bn market cap. She is particularly alert to opportunities to invest at the IPO stage.

Over the long term, Performance has been strong, with a good track record of alpha generation and risk-adjusted returns. However, since the end of Q4 2021, HRI has not escaped the sell-off which has been pronounced in smaller companies and in technology. This has led the trust to trade at a Discount of 20.1% at the time of writing wider than its five-year average and the peer group average. There is no discount control mechanism in place.

Herald Investment Management has a small team with 10 investment professionals, including four regionally focused portfolio managers who specialise in different fields within the TMT sectors, all contributing to the analysis of companies within the HIT portfolio. HRI’s portfolio is diversified across sub-sectors and includes over c. 350 equity investments which increases stock-level diversification.

Katie currently has significant levels of cash in hand in the portfolio ready for deployment when opportunities arise. Currently, the portfolio is not geared.

Analyst's View

HRI offers an opportunity for investors to focus on the telecommunications, multimedia, and technology sector through a diversified portfolio of innovative growth companies at the smaller end of the market cap spectrum. The longstanding specialist nature of the strategy is reflected in the exposure to niche sub-sectors that are not commonly found in the more traditional large cap-dominated tech funds, such as Polar Capital Technology Trust and Allianz Technology Trust. We think such opportunities have the potential to significantly outperform the benchmark over the long term, while the willingness and ability to invest in IPOs is another potential source of alpha.

However, the persistent rise in global interest rates this year and heightened geopolitical pressures have increased market uncertainties and reduced investor confidence. As a result, HRI’s absolute performance has been doubly impacted year-to-date. Firstly, it has been caught up in the broad-based risk sell-off which has hit small caps harder than large cap peers. Secondly, it has been affected by its growth exposure. We believe it is likely that HRI will continue to face such headwinds in the short term. However, as economic conditions ease the inherent sensitivity of small caps may induce a sharp recovery, with high-growth sectors likely to be beneficiaries. HRI’s discount has widened significantly year-to-date which may offer an opportune entry point, although we would caution it may take some time for sentiment to shift.

Bull

  • Management team has significant sector expertise
  • Consistent long-term performance record
  • Zero gearing and high cash availability reduces risk and offers the opportunity to deploy capital at cheaper valuations

Bear

  • The limited telecommunications, multimedia and technology sector focus limits diversification benefits
  • May underperform significantly in a value-driven environment
  • No discount control policy, which can enhance shareholder volatility and liquidity
Continue to Portfolio

Welcome to Kepler Trust Intelligence

Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.