Henderson European Focus Trust Fund Manager Commentary – August 2022
Tom O’Hara and John Bennett, Portfolio Managers of Henderson European Focus Trust, provide an update on the Trust highlighting factors that impacted European equity markets in August and outline recent portfolio activity.
2 minute read
August saw a sharp reversal of the gains seen in early summer with European equities falling 5.2%.¹ This was fuel led by heightened uncertainty a s investors continued to wrestle with central bank narratives, geopolitics and economic data. The beginning of August saw the partial unwind of the 'peak rates' and 'Fed Pivot' euphoria that dominated market sentiment in July. This accelerated throughout the month and the debate was put to bed due to a hawkish US Federal Reserve (Fed) Jackson Hole conference. Following this, further public statements from Fed officials and a robust August jobs report cemented the view that the Fed is committed to getting inflation under control, hiking rates even if it means plunging the US economy into recession. Thus, we have a "perfect storm" and Europe is in its eye . After six months of war in Ukraine, there was still no sign of a ceasefire and recession looks nailed on as the energy crisis deepens. Gas flows from Russia to Europe remain a weapon of choice: after various 'maintenance' shutdowns seen at Nord Stream 1 in June and July, there came confirmation from Gazprom that Nord Stream 1 would remain indefinitely closed due to an 'oil leak'. Natural gas prices duly surged. At the time of writing, European equities are trying to price what a winter of gas rationing and further elevated gas prices means for the various industries and households that a relocated on the continent. The rest of the year will be volatile but we believe that opportunities will present themselves to add to existing positions or enter new names where the valuation and fundamentals disconnect.
Trust performance and activity
The only significant activity during the month were the sales of Signify (trimming cyclicality) and Roche.
¹Source: Bloomberg as at 31st August 2022
Please read the following important information regarding funds related to this article.
- If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio diversified across more countries.
- The Company may have a particularly concentrated portfolio (low number of holdings) relative to its investment universe and an adverse event impacting only a small number of holdings can create significant volatility or losses for the Company.
- Where the Company invests in assets which are denominated in currencies other than the base currency then currency exchange rate movements may cause the value of investments to fall as well as rise.
- This Company is suitable to be used as one component in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this Company.
- Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
- The Company could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Company.
- Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
- The return on your investment is directly related to the prevailing market price of the Company's shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Company. As a result losses (or gains) may be higher or lower than those of the Company's assets.
- The Company may use gearing as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incured by the Company can be greater than those of a Company that does not use gearing.