LAW DEBENTURE CORPORATION: The £1.2bn belief that exhibits being quirky may also be extremely worthwhile

On the surface, Law Debenture Corporation is one of the country’s quirkiest investment trusts with a professional services business sitting alongside an equity portfolio run by asset manager Janus Henderson. Yet shareholders aren’t complaining – quirky is working for them.

A few days ago, the £1.2 billion stock market-listed fund posted its results for the 2024 financial year, and at a time when global stock markets are adjusting to life under President Trump they made for rather pleasant reading.

In the 12 months to the end of December, the trust registered total investor returns of 15.9 per cent – well ahead of the 9.5 per cent returns from its benchmark, the FTSE All-Share Index. Indeed, it also reported that it had beaten the index over the past three, five and ten years – in the case of the past decade, rather convincingly (147.5 per cent versus 81.9 per cent).

The icing on the cake as far as shareholders are concerned is a proposed dividend increase for 2024 of 4.7 per cent, meaning a final quarterly dividend of 9.5p a share (payable next month) and an annual income payment totalling 33.5p a share. To put this into perspective, the shares currently trade at around £8.90, resulting in an annual dividend equivalent to about 3.8 per cent.

It will be the 16th consecutive year that the trust has grown its dividend payments. If all goes to plan, the first three quarterly dividend payments for 2025 will be set at 8.375p.

Although the equity portfolio, primarily invested in UK stocks, has provided a big chunk of this dividend stream, the trust’s 100 per cent ownership of Independent Professional Services (IPS) has also chipped in, delivering a rich and dependable source of income.

IPS is an unquoted business which offers a menu of company-focused services, ranging from corporate secretarial support to whistleblowing. Last year its revenues increased by six per cent, although pre-tax profits dipped slightly to £15 million.

In terms of the trust’s overall assets, it accounts for about 19 per cent – with the rest managed by stock pickers Laura Foll and James Henderson.

Denis Jackson, the trust’s chief executive, says IPS is an important asset diversifier. ‘Like Laura and James, who run a portfolio of equities for Law Debenture, IPS is a portfolio of businesses,’ he adds. ‘Each year some will do better than others, but overall IPS keeps revenues and profits ticking along.’

Foll and Henderson run a portfolio of 150 stocks with the emphasis all the time on mitigating absolute risk (avoiding losses) rather than focusing on relative risk (how it compares against a benchmark index).

‘We like to run long portfolio lists,’ says Henderson. ‘We often buy companies early and then build our position as we get more confident in their businesses. Over time, the portfolio’s tail does add real shareholder value.’

Given the current turmoil in global equity markets, especially in the United States, Henderson says the trust is ‘an important diversifier that over time should provide shareholders with growth in both income and capital gain’.

He adds: ‘There was a time when I thought that Law Debenture was a one-stop shop for investors. But in a world where technology is all important, I’m not so sure.

‘Investors should hold both technology funds – the likes of Scottish Mortgage – and steadier trusts such as Law Debenture, but then not flip-flop between the two.’

The trust’s overall charges are reasonable at 0.51 per cent. Its stock market ticker is LWDB and identification code 3142921.