For individual investors in the UK

Henderson EuroTrust Fund Manager Commentary – August 2022

Jamie Ross, Portfolio Manager of Henderson EuroTrust, delivers an update on the Trust highlighting the key drivers of performance over the month and recent portfolio activity.

Jamie Ross, CFA

Jamie Ross, CFA

Portfolio Manager

21 Sep 2022
6 minute read

Macro backdrop

August was once again a month where value-style stocks strongly outperformed the growth style. This was due to both rising bond yields - with the US 10-year government bond yield climbing from 2.65% to 3.20% - and a hawkish US Federal Reserve (Fed).¹ The market was generally weak with cyclical stocks underperforming once again after their partial recovery in July. It seems that July was a month in which the more cyclical companies in the market rallied due to no worse-than-expected second quarter numbers, while August was a month where investors focused more on the likely earnings downgrades to come in the final two quarters of 2022. From speaking to a wide range of companies, it is pretty clear that trading conditions are worsening, or are at best not improving from already supressed levels; this seems to be true across most sectors.

Trust performance and activity

EuroTrust returned -2.6% and underperformed its benchmark slightly in August after two strong months. The FTSE World Europe ex UK Index re turned -2.2%.¹

Within the best contributors to fund performance in August, there was a clear pattern of financials (Munich Re, Bawag, UniCredit, Deutsch Boerse), energy companies (Total) and perceived defensive stocks (KPN) producing strong performance. This pattern is linked to rising bond yields, the outperformance of value stocks and the underperformance of cyclicality during the month.

With our biggest detractors from performance, there was certainly a pattern of the more growth-orientated companies underperforming (such as DSM, Cellnex). Sanofi (the fund's second worst performing position over the month) also underperformed and deserves some explanation. We bought Sanofi last year and it has generally performed very well for us since. This year, even with the August issues, it remains a top 10 contributor. In August, however, the shares fell around 13% following the widespread news coverage of potential litigation against a product called Zantac. To give a brief history, Zantac, in both prescription and other-the-counter (OTC) form, has been owned by numerous different pharmaceutical companies since it came to marke t in the late 1980s. Sanofi owned the rights to the OTC product for three years between 2017 and 2019 be fore the company voluntarily withdrew the product from the market following concerns from the US Food and Drug Agency (FDA) that the product might contain higher-than-allowed levels of a potential carcinogen called NDMA. It is a complex situation but at a very high level we are about to see a number of US court cases with claimants looking for damages, even though there is no clear-cut scientific evidence that the product even causes cancer. Most legal experts would agree that the range of potential pay-outs from the involved industry parties could range from $10-30 billion (or maybe up to $50 billion in a stretched worst-case scenario). Sanofi has seen a $20 billion loss of market cap this month, which we think seems to be pricing in a worst-case outcome as well as Sanofi being liable for a much higher proportion of damages than their period of ownership would suggest. We have maintained our full position but have so far held off from the temptation to buy more, however.

As with June and July, August was another uneventful period for trading activity. We added no new positions and sold no existing holdings. However, we generally continued to reduce the fund's exposure to some of the strong-performing, higher valuation, high-quality defensive growth companies (KPN, Novo Nordisk, Sartorius) while adding to slightly less defensive but also lower valuation holdings (Kion, CNHI, Airbus, Metso). Leverage currently sits at 3-4%.


We will continue to retain balance in our exposures by considering two types of business for investment; those where we see the potential for high and sustainable returns that we think are undervalued by the market and those companies where we can see a material improvement in medium-term business prospects.

HNE Aug 2022

1Source: Bloomberg as at 31 August 2022

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.


Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.


The information in this article does not qualify as an investment recommendation.


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