Fund Manager Commentary - Henderson EuroTrust



European markets have made no progress in September, but I am pleased to say that Henderson EuroTrust has continued to keep its nose just ahead of our benchmark index. There have been warnings from Bayer and Continental, the former on caution about the Monsanto deal and the latter on tougher times in the Auto sector, which was further emphasised by a downgrade to targets from BMW (Henderson Eurotrust has held no positions in these companies for quite a while, skilfully or fortuitously as you may choose). There has also been political noise in the form of further tension within Chancellor Merkel’s coalition in Germany, concern about the likely Budget Deficit in Italy as the spending plans for 2019 are prepared, and finally the never ending saga of Brexit. With the European Central Bank still flagging its intention to continue to buy fewer Bonds over the next six to twelve months, there is clearly a gradual drying up of liquidity and coinciding with this a plateauing of economic growth expectations. All these “macro” events explain why Europe remains a relatively unpopular region for Global Investors, in spite of a steady improvement in company earnings – with some exceptions as always.

We are maintaining a small liquidity position but have been building the size of our highest conviction positions where we have felt these have fallen to interesting levels on a medium to long term basis. The Annual Report of Henderson EuroTrust which will be published shortly, will have a lot of details in it as ever, and one of the notable differences is the increase in the weight of our Top ten holdings in the portfolio overall.

Politics will continue to rumble on: Germany has begun the slow progression to a “post Merkel” era but no-one yet knows what that might mean. My guess is a continuation of consensus centrist policies. Italy will be noisy – by definition when there is a coalition between a relatively far ‘Left’ and a relatively far ‘Right’ party (we currently have no holdings in Italy). Brexit is a UK problem that will have knock on negative impacts across Europe, but Investors in Henderson EuroTrust might wish to remember that we have no UK holdings. We also continue to favour consistent, quality, long term compounders, while fully accepting that some of these have begun to look quite expensive relative to their long term valuation levels. But that premium reflects the expectation of reliability.

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 is not a guide to future performance. 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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Henderson EuroTrust plc

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser.

Past performance is not a guide to future performance. 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. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which investment products and services are provided by Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each registered in England and Wales at 201 Bishopsgate, London EC2M 3AE and regulated by the Financial Conduct Authority) and Henderson Management S.A. (reg no. B22848 at 2 Rue de Bitbourg, L-1273, Luxembourg and regulated by the Commission de Surveillance du Secteur Financier). We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Specific risks

  • Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
  • This trust 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 trust.
  • The trust 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 trust.
  • The trust could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the trust.
  • If a trust's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio diversified across more countries.
  • The return on your investment is directly related to the prevailing market price of the trust’s shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the trust. As a result losses (or gains) may be higher or lower than those of the trust’s assets.
  • 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.
  • Where the trust 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.
  • The trust may use gearing as part of its investment strategy. If the trust utilises its ability to gear, the profits and losses incured by the trust can be greater than those of a trust that does not use gearing.

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