Henderson EuroTrust 24 April 2019

Henderson EuroTrust (HNE) aims to deliver superior total returns from a portfolio of high quality European (ex UK) companies.

Tim Stevenson retired from the team at Janus Henderson in February 2019 after more than two decades at the helm. Jamie Ross has taken over as the lead manager, after being appointed deputy fund manager on EuroTrust in March 2017 and then co-manager at the start of October 2018. Jamie joined Janus Henderson as a graduate in 2007, starting in European equities before moving to be a co-manager on the Henderson UK Alpha Fund (OIEC).

The investment process has not changed since the new manager took the reins, and his style is the same. Searching for good quality, reliable companies remains at the heart of the approach, with the end goal of delivering investors consistent returns. Jamie looks for companies that have strong market positions, strong balance sheets, consistent growth and quality management, and believes Europe is an excellent hunting ground to do so.

As Tim did, Jamie has biases towards particular sectors and the company’s largest overweight is towards the healthcare sector. Moreover, IT, communication services and industrials also represent significant portions of the portfolio. As well as looking at companies on a sectoral basis, the manager likes to look at companies based on three broad classifications; compounders, improvers and special opportunities.

The trust has an exceptional track record, and over the past nine calendar years the trust is yet to underperform the benchmark. With this said, Jamie has taken over the portfolio in a particularly challenging environment, with political and macro-economic uncertainty surrounding Europe. Although the trust was unable to generate positive returns over 2018, most of the losses have been recovered in the first quarter of 2019 and since the start of the year has generated 10.7% NAV returns. Alongside total returns the trust offers a, far from small, dividend. The manger aims to provide a growing level of income, and the trust currently yields 2.8%, well ahead of the weighted sector average.

Over the past few years we have seen the trust’s discount fluctuate greatly. As of April 2019 the trust has trading at a discount close to 10%, considerably wider than its one-year average of 8.5%. Currently, the AIC sector weighted average is 9.2%.

Under Tim the trust had a great run in terms of performance, and his ex-UK ‘quality growth’ style of stock picking has been passed onto Jamie Ross. Jamie has come to the helm of the portfolio at a particularly tricky time, with the political and economic situation making many investors shy away from the region. This has meant that we have seen the discount widen considerably, largely due to factors beyond the managers control.

We see this as a great opportunity for investors to diversify their portfolios and gain exposure to some of the unique companies that Europe has to offer. Since Jamie has taken control of the portfolio we have a clear shift to become increasingly concentrated, and it has been decided among the board that gearing will become a more consistent feature. This gives Jamie the opportunity to generate high levels of alpha and, in turn, could see the discount come in considerably when appetites for the trust return.