Herald Investment Trust (HRI) generated strong absolute returns in the first half of 2019, with marked outperformance by both its UK and US portfolios of their local market indices. Both a general market recovery and a recovery in global technology stocks have helped, but HRI’s UK and US portfolios have both benefitted from a wave of takeover activity, allowing HRI to lock in significant premiums.
This illustrates how HRI’s holdings can move very quickly, validating the manager’s strategy of maintaining an extensively diversified portfolio. However, liquidity is an ever-present issue and these disposals also validate Katie Potts’s approach. In her own words, “in small caps, profits are only profits when they are realised”.
HRI’s objective is to achieve capital appreciation through investments in smaller quoted companies in the areas of telecommunications, multimedia and technology. Investments may be made across the world, although the portfolio has a strong position in UK stocks. The business activities of investee companies will include information technology, broadcasting, printing and publishing and the supply of equipment and services to these companies.
