Fund Profile

Henderson European Focus Trust 10 June 2021


Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Henderson European Focus Trust. 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.

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Henderson European Focus Trust (HEFT) offers investors a flexible approach to large-cap European equities. The managers, John Bennett and Tom O’Hara, have an investment ‘DNA’ which is composed of six distinct facets, encapsulating both financial analysis and their general philosophy around investing. The team are acutely aware of the need to remain flexible, and avoid becoming married to a single style of investing. They believe that such an approach will ultimately prove of value to HEFT’s shareholders by avoiding prolonged underperformance when a specific style is out of favour. We discuss the investment philosophy of the team in further detail in the Portfolio section.

The team have recently made substantial changes to their portfolio in order to capitalise on the post-pandemic V-shaped recovery across varying sectors. During the second quarter of 2020 the team positioned HEFT to capitalise on the recovery in industrial stocks, foreseeing the rapid revival in industrial output. The team have unwound this trade at the start of 2021, having now positioned HEFT to take advantage of the second V-shaped recovery, this time in consumer-sensitive stocks. The impact of the team’s flexibility is clearly seen in their performance because they have outperformed their benchmark over the long term, and have generated even stronger near-term performance, as we describe in the Performance section.

HEFT currently trades at a Discount to its peers, despite its recent outperformance. We believe this is likely a consequence of investors’ historical avoidance of European equities, rather than a factor unique to HEFT. We also note that HEFT has good ESG credentials – even with its recent allocation to value-oriented stocks – as a result of the managers’ holistic approach to investing.

Analyst's View

HEFT offers something we believe is rather rare in either the open- or closed-ended European equity space: a team who successfully incorporate top-down factors in their investment process. In doing so they diversify the source of HEFT’s alpha, offering investors not just successful stock-picking but also a macro overlay which enables HEFT’s style exposures to shift over a given cycle.

In contrast to the vast majority of the European peer group which have a clear growth bias, HEFT offers a differentiated proposition at the current time. In our view, HEFT is currently well positioned as a partial inflation hedge. This is thanks to its increased allocation to financial stocks, lower overall valuation metrics and recent overweight to consumer discretionary stocks (which will likely be the driver behind near-term inflation as demand picks up). As such, and potentially of relevance to the discount, HEFT may be increasingly attractive to investors as the recovery continues if the prospect of inflation continues to raise its head.

In our opinion, the recent performance of HEFT illustrates the potential of having a flexible approach to investing. The team have made decisive moves to position towards industrials first, and then latterly towards consumer discretionary as the recovery took hold. In doing so they have altered the overall style tilt of the portfolio, yet have also successfully generated significant alpha. Such actions are inevitably difficult to time, but we are encouraged not only by HEFT’s recent outperformance but in hindsight also by the timeliness of the team’s trades.

bull bear
Flexible investment process that can adapt to changing markets, with strong performance during the pandemic Active macro allocation decisions add potential timing risk
Long-term outperformance from stock-picking May underperform in the near term if the market quickly reverts to favouring growth over value
Currently a very differentiated position relative to the growth-focussed peer group Allocation to oil majors and cement manufacturers may be unpalatable to investors operating explicit ESG screens
Continue to Portfolio
2024 Kepler Growth Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for growth... Find out more

Fund History

10 Jul 2024 Things can only get better
Discounts are yawning but markets are thawing and boards are on the offensive; Labour might not be the only thing making a comeback this year...
29 May 2024 Results analysis: Henderson European Focus Trust
HEFT outperforms ahead of its forthcoming merger...
15 May 2024 Why'd you have to go and make things so complicated?
European growth may be more complicated, and positive, than we suspected...
24 Apr 2024 Is ESG finished?
Two of our analysts debate whether it’s time to give up on ESG…
26 Mar 2024 Flash update: Henderson European Focus (HEFT) and Henderson EuroTrust (HNE) proposed merger
What are the benefits of the Proposed merger of Henderson European Focus Trust (HEFT) and Henderson EuroTrust (HNE)?
13 Mar 2024 Roller coaster ride
Thematic funds have seen significant outflows over the past two years…
19 Jan 2024 Finding your Eurovision
As one of the top-performing sectors, why does Europe remain strangely out of favour with UK investors?
17 Jan 2024 Top of the Pops
We reveal the winners of our investment trust ratings for 2024…
13 Dec 2023 Results analysis: Henderson European Focus Trust
A focused portfolio of European ‘Global Champions’
17 Nov 2023 Don’t Panic!
Our analysts look for value against a backdrop of bombed out investment trust discounts…
08 Nov 2023 Once more into the breach?
With yawning discounts across the board, some sectors have been hit harder than others - our analysts think there could be value there for those with the sangfroid to fight for it...
13 Nov 2023 Martin Currie Global Portfolio and Henderson European Focus Trust
Zehrid Osmani and Tom O'Hara
Rewatch this webinar which is part of our November online event 'Discounted opportunities in a tough market'...
Watch Recording
21 Jun 2023 Fund Analysis
HEFT: pragmatic decision-making has led to good performance in a variety of market conditions…
14 Jun 2023 Let's go round again?
Discounts have ballooned across the investment trust world, but our analysis shows we've been here before...
25 May 2023 Results analysis: Henderson European Focus Trust
HEFT: outperformance comes from a pragmatic and flexible approach...
19 Apr 2023 Are we nearly there yet?
We look at which trusts have done best year to date, and ask where there may be value…
16 Mar 2023 Diversity matters
We examine the effect of blending multiple funds within your regional allocation and find that – while the culture wars may rumble on elsewhere – the benefits of diversity for investors are unarguable…
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
08 Dec 2022 Results analysis: Henderson European Focus Trust
HEFT’s valuation sensitivity and strategic flexibility look well suited for a troubled economic period…
05 Oct 2022 European equities: Oui ou non?
Our analysts go head to head on the prospects for investors looking to the continent for prospective investments...
07 Sep 2022 Fund Analysis
HEFT has generated good recent performance, and trades at an attractive discount…
25 May 2022 Results analysis: Henderson European Focus Trust
HEFT has shown strong resilience despite the headwinds facing Europe, thanks to a committed valuation discipline…
25 Mar 2022 Slides and Audio: Henderson European Focus Trust
Download the presentation and listen to the audio from our 'Ideas for your ISA' virtual Spring event on 15 March...
23 Mar 2022 Fifteen ideas for your ISA
Slides and audio from our event last week, featuring fund managers running money in every major market in the world...
02 Feb 2022 Fund Analysis
HEFT’s stylistic balance has allowed it to outperform over myriad market environments, yet it trades at an attractive discount…
08 Dec 2021 Results analysis: Henderson European Focus Trust
HEFT has delivered solid NAV returns this year, and shareholder returns have been buoyed by a closing discount…
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 Fund Analysis
HEFT offers investors flexible exposure to Europe, with a current tilt toward value supporting the potential for returns…
27 May 2021 Results analysis: Henderson European Focus Trust
HEFT is positioned for the next leg of Europe’s pandemic recovery, having outperformed its benchmark over the last six months…
19 Aug 2020 Has the time come for Europe?
With mutual eurozone debt established all eyes are on the continent once more; but what will drive relative returns?
11 May 2020 Kepler Rated: Henderson European Focus
HEFT offers a well concentrated portfolio of high quality European companies…
27 Jan 2020 Fund Analysis
HEFT’s wide discount offers an attractive entry point into an increasingly actively managed portfolio…
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…
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