Fund Research

Henderson EuroTrust

Last update 30 May 2018

Henderson EuroTrust (HNE) is a rare creature in the investment trust world, having had the same manager for over two decades. Since 1995 Tim Stevenson, who joined Henderson in 1986, has applied the same ex-UK 'quality growth' mandate.

This is a pure stock picking trust, with Tim looking to buy and hold good quality, reliable companies that can increase returns to the trust. It has an unswerving growth mandate, with Tim investing in companies that are operating in the global sphere but listed and headquartered in Europe. He looks to identify companies which will benefit from long-term tailwinds, and takes a long view in his ownership of them.

These tailwinds should ideally help a company deliver for the trust over the long term. In the current environment, Tim is positioning the portfolio to benefit from companies that can adapt to change in the face of what is likely to be a relatively low-growth environment. The main themes in the portfolio (reflecting Tim’s view that GDP growth will be slow for many years) include demographics, healthcare, savings, emerging market consumers, innovation, technology and outsourcing.

In the trust's 2017 report and accounts, the chairman reflected on the 25th anniversary of the trust and commented that over this period, the NAV outperformed the benchmark in 20 of the 25 years. Over the past decade, the trust outperformed in nine of them. This represents a very impressive consistency of outperformance from the same manager.

In the future Tim will be aiming to have a higher-conviction portfolio. Rather than the current 3.3% average position for his top ten holdings, he will look to own closer to 5% for his best and highest conviction ideas. This represents a move closer towards the investment trust peer group, as regards the shape of the portfolio.

Dividends are a by-product of the sort of companies that Tim likes to invest in over the long term, and is not a focus per se. The trust’s dividend currently yields 2.2% (above the weighted average for the investment trust sector of 1.8%) and, having delivered 15.8% compound dividend growth over the past 15 years, the progression over the years has been impressive.

In discount terms, Henderson EuroTrust has tracked the average for the European investment trust peer group. The board last bought shares back in July 2016, on a discount of c.12%. The current discount is 5.4%, just wider than the average for the past year.

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