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Henderson uses put option to protect its range

Henderson has joined the band of multi-managers who are using put options.

The fund firm has added a FTSE 250 put option across its multi-manager range as an insurance policy in case markets face a setback.

Despite its positive long-term view of the UK, which it regards as reasonably priced, it has concerns about the possibility of a short-term correction within the long-term upward trend, similar to that experienced in May and June last year.

This could happen if reports of negative company results impact on stories of mergers and acquisitions.

According to Henderson, the cost of putting the protection in place through the put option was low relative to the peace of mind it will provide in the event of a market correction.

Head of multi-manager Bill McQuaker says: “Markets have been benign so far this year, so we have not needed the protection but I do not think that it has been a waste of money.

“Over the last two or three years corrections have come shockingly quickly. We think it’s beneficial to have something in place to make money when other bits of the portfolio are losing it.”

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