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 discount has widened recently despite its impressive risk/return profile…
Overview

Henderson EuroTrust (HNE) offers investors a portfolio of continental European equities with the sole objective of capital growth. Managed by Jamie Ross, who is approaching his third year as lead manager, the trust continues to maintain its preference for high-quality European growth opportunities, though it has recently taken a more balanced stance. Having rotated into ‘reopening winners’ in the latter part of 2020, the portfolio now contains more cyclical and cheaper stocks. Jamie has begun normalising his portfolio turnover (currently 40% p.a.) since the aforementioned rotation, as outlined in the Portfolio section, with HNE’s portfolio still comprising of companies which demonstrate long and enduring business models that can generate attractive growth prospects.

Under Jamie’s tenure, HNE has been able to generate a strong track record of outperformance against its benchmark and marginally ahead of its peers. Yet recently, it has experienced an uncharacteristic 12-month period of underperformance. This is primarily due to external factors stemming from Chinese government policy, affecting two of its computer game holdings. However, this has not been enough to damage HNE’s long-term risk statistics, which still rank better than those of its peers and benchmark. HNE currently trades on an 8.1% discount, wider than that of its peers but consistent with its long-term average.

ESG continues to be a major component of Jamie’s process. He believes that sustainability will be the next major driver of global growth, and that it is an area which Europe already dominates as it contains the majority of the world’s most sustainable companies. The board of HNE is also proposing incorporating explicit ESG restrictions, and although this will not have a material impact upon the investment process, this is likely to entail a small number of positional changes.

Analyst's View

In our view, HNE demonstrates the long-term benefits of taking a disciplined approach to quality growth investing in Europe. Jamie exhibits an element of continuity as HNE’s new manager, as he continues to hold the enduring growth opportunities that have long characterised the trust under the previous manager. Yet, his recent steps to create a more ‘balanced’ portfolio are an interesting development. As we enter into a more inflationary environment, Jamie’s rotation into both cheaper and cyclical companies means the portfolio should now be less sensitive to rising interest rates, especially when compared to some of the more expensive quality growth companies that represented a larger proportion of the portfolio until late 2020.

We also believe that HNE’s recent Performance is not a reflection of its true potential and is likely due to one-off stock specific factors. We note that HNE’s long-term risk-adjusted returns remain impressive. In fact, HNE’s current discount is in our opinion an attractive entry point, as once the performance recovers, investor sentiment around HNE may also reverse. HNE’s potential integration of explicit ESG targets may also make the portfolio more attractive, given it commits the trust to having strong ESG credentials without requiring material changes to its investment policy.

bull bear
Strong historical risk-adjusted returns
Opportunistic use of gearing can expose the trust to market-timing risk
Wide discount offers potentially attractive entry point
No longer pursues progressive dividend policy
Increasingly balanced portfolio may better insulate HNE from near-term risks
Tilt to cyclicals may mistime a prolonged growth rally
Continue to Portfolio

Fund History

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) has a strong track record and the new manager shares all the hallmarks of his predecessor...
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, but some managers see rich pickings for those willing to take the risk...
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 fund managers in the UK with similar characteristics...
30 May 2018 Forza Italia!
Recent weeks have seen Italy's rocky relationship with the EU thrust into the spotlight once again, but apart from fresh volatility - how much has really changed?
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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