27th Jan 2014 12:38
LONDON (Alliance News) - The Diverse Income Trust PLC Monday said it has bought a put option amounting to 1.6% of its portfolio in order to protect against a significant fall in the FTSE 100.
Shares in the company were Monday quoted down 2.5% at 81.68 pence.
In a statement for its half-year results, the Diverse Income Trust said it bought the put option in December. The put option will reduce daily fluctuations in the trust's net asset value.
If the FTSE 100 falls to 5,8000, the put option comes into play, the company said.
The Diverse Income Trust said it isn't looking to protect against a minor fall in the markets, but against a "more significant setback". The put option expires on June 19, 2015. If the FTSE 100 index were to fall to zero, the notional value of the put option would be GBP68.8 million according to the company.
"At some point, central banks will have to wind down their policy of Quantitative Easing and some commentators believe that if this happens soon, it might undermine the markets," Michael Wrobel, chairman, said in a statement.
The trust said said it gave a half-yearly total return of 21.6% per share, compared to a 15.9% increase in the FTSE SmallCap Index (excluding Investment Companies) and a 13.4% increase in the AIM All-Share Index.
The company's net asset value return was 19.2%. Its assets grew to GBP252 million in the six months to November 31, not only because of an increase in net asset value, but also because of its merger with Miton Income Opportunities Trust PLC in September last year.
"The focus of the portfolio remains on a broad spread of companies with strong balance sheets that are well placed to grow their earnings as well as their dividends, even in fluctuating economic circumstances. We remain confident that the portfolio is well-placed to continue to deliver premium returns in the future," Wrobel said.
By Samuel Agini; [email protected]; @samuelagini
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