Fund Profile

Henderson European Focus Trust 27 January 2020

Disclaimer

Disclosure – Independent Investment Research

This is independent research issued by Kepler Partners LLP. The analyst who has prepared this research is not aware of Kepler Partners LLP having a relationship with the company covered in this research report and/or a conflict of interest which is likely to impair the objectivity of the research and this report should accordingly be viewed as independent.

Overview
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Overview

Henderson European Focus Trust aims to offer investors attractive total returns through a highly concentrated portfolio of European companies.

The portfolio is comprised of just 45 stocks, with the top ten making up close to 40% of the total NAV. The manager, John Bennett, utilises a bottom-up approach to portfolio selection, looking for high-quality companies with strong balance sheets and cash-flow potential. However, he still places a high level of importance on the price, and won’t overpay to include a company in the portfolio.

The trust has a strong track record relative to the benchmark (the FTSE World Europe ex UK), having outperformed in eight of the past ten years. The trust has also outperformed its AIC peer group in seven of these years. Performance has been equally impressive in recent times, with the trust generating NAV total returns of 24.8% over 2019. In comparison, its AIC Europe and IA Europe peers generated NAV total returns of 22.6% and 20.4% respectively while the benchmark returned 20.4%.

Despite the strong recent performance, the trust continues to trade at a double-digit discount (10.1%). This is the second-widest discount in the eight-strong AIC Europe sector, where the weighted average discount sits at 7.2%.

Analyst's View

HEFT has an impressive and consistent long-term track record for outperformance of the benchmark and peer group. However, the manager and board have recognised that they are coming under increasing pressure from passive vehicles which track the European index at considerably cheaper fees. As such, a key topic of discussion between the manager and board has been on how to further differentiate the portfolio. At the AGM in January 2020, investors will be asked to approve a policy which will allow the manager to hold 35–45 stocks, down from 45–60. Furthermore, shareholders are also being asked to approve an increase of 40% to 50% to the limit for stocks weighted at 5% or more of the portfolio.

We particularly like managers that have conviction in their investments, and these changes will give John greater scope to demonstrate his stock-picking skills and ensure greater differentiation from European indices and peers. These adjustments are also the only ones that can be successfully achieved in a closed-ended fund, without the worries of subscriptions or redemptions should the trust or sector go out of fashion.

bull bear
Increasingly active approach has the potential to generate high returns
Increase in concentration mixed with gearing means potentially higher volatility
Long-term track record of outperformance of the benchmark and its peers

Attractive discount relative to the peer group

Continue to Portfolio

Fund History

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…
View all

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