Law Debenture (LSE:LWDB) is a unique investment trust. It is part equity income portfolio and part professional services company, all in one high-performing £1.7 billion wrapper.
It has been a stalwart of the MoneyWeek Investment Trust portfolio since September 2015, with the second-best performance of all the trusts selected. Over the past ten years the shares have produced a total return of 263%, versus 130% for the FTSE All-Share index. It has also outperformed its benchmark by a wide margin over one, three and five years.
This performance is by far and away the best of any trust in the UK equity income sector. The secret of its success is down to the independent professional services (IPS) business.
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The success of Law Debenture’s IPS
The IPS business provides a selection of relatively mundane, but essential services focused around three groups: pension services, which provides pension trust services across the UK; corporate trust, a provider of trust and escrow services for transactions such as bonds and mergers and acquisitions (M&A); and corporate services, which provides company secretarial and entity management services.
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Inflation-linked organic growth has been complemented by acquisitions – most recently the purchase of company secretarial unit Konexo in 2024 – have all helped IPS grow both top and bottom lines.
These businesses grew net revenue by 6% in the first half of 2026 – the ninth consecutive year of mid-to high-single-digit growth.
These businesses are relatively specialist, so they are difficult for customers to do in-house. They are also low-margin and only profitable at scale, giving incumbent providers a significant edge.
There are only a handful of peers: the four public comparables include London-listed JTC, which is in the process of going private.
Dividend support
IPS accounts for only 15% of Law Debenture's net asset value (NAV), but over the years, its profits have helped support around a third of the trust's dividend distributions to investors.
That gives James Henderson and Laura Foll, the managers of its equity portfolio, a huge advantage for their strategy.
While other UK equity income trusts need to prioritise owning dividend-paying shares to support their distributions, they can take a more flexible approach.
For example, in February 2020, Law Debenture built a position in Rolls-Royce, which then had to suspend its dividend during the pandemic. Other income trusts might have been forced to sell, but Henderson and Foll held on. The position has since generated a return of more than 1,100%.
Other examples include Marks & Spencer and Babcock. Both of these have been held for capital gains, despite their poor dividend credentials.
A strong first half
The portfolio – which accounts for 85% of NAV – is built around growth, income and value. There is also a higher percentage of smaller and medium-sized companies than you might usually find in a UK equity income trust, which reflects the solid foundation provided by IPS.
For example, in the first half, positive contributors in the investment portfolio included companies viewed as beneficiaries of AI, such as Ceres Power and Infineon Technologies. Henderson and Foll also added positions in LSEG and Relx, two previous winners that had sold off due to concerns about the threat of AI.
Strong performers during the period included Beazley, Senior, International Personal Finance, Schroders and Tate & Lyle – all of which received takeover offers, which is “further evidence of the valuation opportunity available in UK equities”, say the managers.
The trust's own shares have also been trading well. For the six months to the end of June, they produced a total return of 16.2%, as they moved from a 2.5% discount to a 1.7% premium on top of the underlying NAV return.
The quarterly dividend was increased by 6% to 8.875p. Based on the company's current target for the year, the shares currently yield around 2.9%.
Henderson is set to retire in June next year, with Foll taking over the portfolio as lead manager. Given her ten years' experience at Law Debenture – as well as 12 on the Global Equity Income team at Janus Henderson – it should be business as usual when she assumes sole command.
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