Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Henderson EuroTrust. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
HNE’s fund manager has doubled down on high-quality companies in the recent market rout, with the trust trading on a wide discount…
Overview

Henderson EuroTrust (HNE) has now been under the stewardship of Jamie Ross, who took over as sole fund manager in February 2019, for three years. Jamie has remained committed to the quality-growth style of investing that has long characterised HNE. Jamie’s investment process is based around a proprietary scoring system, described in the Portfolio section, which analyses stocks around three broad factors: valuation, quality and momentum.

While today’s markets have been very difficult for quality-growth-focussed styles, Jamie remains optimistic on the long-term potential for the companies in HNE’s portfolio. This optimism is reflected in his recent transactions, where he has been investing in a handful of new ideas and adding to existing companies that he has most confidence in so as to increase the overall quality of HNE’s portfolio. These purchases have been partially funded by the use of Gearing, which has begun to creep up from its previous un-utilised state.

While HNE’s performance since Jamie took over has been ahead of that of its peers and benchmark, it has underperformed over the last 12 months. This is largely a consequence of the trust’s slant towards quality-growth companies, which have been deeply out of favour over the past year, and especially so in 2022 (as we describe under Performance). This same headwind has also caused HNE’s Discount to widen. It currently stands at 14.2%, which is wider than both its peer group’s average discount and its own five-year average.

Kepler View

Being a quality-growth investor has been a difficult job amid headwinds for companies of this type, but Jamie has stuck to his principles and not allowed his clearly defined investment process to be warped by these short-term pressures.

We are encouraged by his recent trading activity, with the end result likely to make HNE an even more attractive prospect for any quality factor-minded investor. He has used the sell-off to improve the overall quality and growth metrics of HNE without having to compromise his valuation discipline.

HNE’s appeal to long-term investors is amplified by the potential opportunity presented by the trust’s discount. The historically wide discount HNE currently trades at is not surprising given the headwinds facing quality-growth-biased strategies, but it means that HNE has become an ever cheaper way to access Europe’s highest-quality stocks. Jamie believes that high-quality companies are better positioned to survive periods of economic hardship and we tend to agree, making this a potentially attractive entry point for long-term investors.

While Jamie follows an entirely bottom-up approach to constructing HNE’s portfolio, investors do nonetheless need to grapple with the economic outlook for Europe. While the region is facing the same inflationary pressures as other Western nations, there is some silver lining in that regard, as much of the pain Europe has faced has been the result of the Ukrainian conflict, an external factor rather than a structural issue with Europe’s economy. If investors believe that the conflict is potentially a resolvable issue, then they should also believe that there could be a corresponding alleviation of inflationary pressures in Europe, which could presage a major bounce in the region’s equity markets. Conversely, investors who remain less optimistic around Europe’s recovery may find solace in Jamie’s adjustment of the portfolio, positioning it further towards high-quality companies and away from those sensitive to an economic downturn.

Bull

  • A clearly defined investment process focussed on quality-growth companies which are more resilient in a downturn
  • Overall portfolio fundamentals have improved on a relative basis
  • Trades at a historically wide discount

Bear

  • Performance may lag during a rising rate environment
  • Dividend payouts will eventually fall under new policy
  • Increasing use of gearing amplifies downside risk
Continue to Portfolio

Fund History

27 Jul 2022 Has the comeback begun?
Our analysts debate whether the market has fully priced in the current inflation and looming recession…
08 Jul 2022 Fund Analysis
HNE’s fund manager has doubled down on high-quality companies in the recent market rout, with the trust trading on a wide discount…
01 Dec 2021 Fund Analysis
HNE’s discount has widened recently despite its impressive risk/return profile…
06 Oct 2021 Slides and Audio: Henderson EuroTrust
Download the presentation and listen to the audio from our 'Now that's what I call a discount!' Autumn conference on 30 September...
23 Sep 2021 Now that's what I call a discount 2021!
For the second year running we examine trusts on discounts which, in our view, don't make sense...
09 Sep 2021 What next for European equities?
After a strong period for European equity markets, we ask whether this trend can continue…
10 Jun 2021 Green is good!
2021 will see billions dedicated to sustainable initiatives, which brings with it a host of possible investment opportunities...
28 Apr 2021 The next value opportunity?
Two of our analysts debate whether Europe's improving vaccination programme will be the next opportunity for investors in their pursuit of returns...
05 Mar 2021 Fund Analysis
Active re-positioning around the COVID-19 recovery means HNE continues to widen its outperformance….
16 Dec 2020 My haven’t you grown!
How sustainability has gone from zero to hero in 2020…
28 Oct 2020 Fund Analysis
HNE has outperformed in each of the three phases in markets this year, yet trades on a discount of 9.3%...
15 Oct 2020 Nice guys finish first
ESG has moved from hippy pipe-dream to corporate mainstream, but what is it really and where do we see opportunities?
29 Jul 2020 To be, or not to be (geared), that is the question
Gearing is part of the toolkit that trusts use to outperform OEICs. But how is it best implemented?...
05 Jun 2020 Deep impact
Audio and presentations from our conference this week, where fifteen of the world's best fund managers described a profoundly altered investment landscape...
13 May 2020 Braving the new world
Join 15 of the UK's best known fund managers at the Kepler Trust Intelligence Virtual Summit to find out how they see the world after the pandemic...
05 Feb 2020 The best form of defence
We look at the continued rise of passive funds, and find out how investment trust managers are countering it...
18 Dec 2019 The squeeze continues: how trust costs keep falling
As pressure on costs remains, we reveal which trusts have achieved the most significant reductions in 2019….
12 Dec 2019 Fund Analysis
The new manager is now outperforming, meaning HNE’s current discount is an interesting proposition…
26 Jun 2019 Measure for measure
In the first of a two-part series, we examine the tools investors can use to assess how active a manager actually is…
24 Apr 2019 Nothing compares to EU
Currently one of the financial world's most unloved regions, we look at the sectors that are unique to Europe and how the persistent pessimism has presented attractive opportunities…
24 Apr 2019 Fund Analysis
Henderson EuroTrust (HNE) offers a great opportunity for investors to diversify their portfolios and gain exposure to some of the unique companies that Europe has to offer...
03 Apr 2019 Nice guys finish first
We review the rise of ESG, its impact on investment trusts, and the various ways ESG has evolved in the trust world...
28 Nov 2018 Every cloud...
The endless grinding negativity of Brexit has driven investors away from Europe in scores, leaving rich pickings for opportunistic buyers...
26 Nov 2018 Fund Analysis
Having had the longest-tenured manager in the sector, a new manager is taking the reins and making some subtle changes to the portfolio.
07 Nov 2018 The Great British Buffett
New research claims to have identified the secret of Warren Buffett's success; we apply similar principles to find the UK's answer to The Sage of Omaha...
16 Oct 2018 The Investment Trust Advantage
Our recent conference for discretionary fund managers saw some of the UK's leading fund managers discussing the outlook for the world's major regions and asset classes...
30 May 2018 Forza Italia!
Recent weeks have seen Italy's rocky relationship with the EU thrust into the spotlight once again, but we think volatility for European equities may be a buying opportunity...
30 May 2018 Fund Analysis
This fund has the longest-tenured manager in the sector, with an impressive consistency of outperformance of the benchmark...
View all

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