Fund Manager commentary - Henderson EuroTrust



January saw a very sharp rally in equity markets globally. In Europe, after a terrible end to 2018, the market rallied strongly in January; this represented the best monthly performance in four years. The Trust managed to essentially keep pace with the market which was very pleasing given the fact that the market was led higher by cyclical companies and value as a factor (natural underweights for our strategy).

We initiated a new position in Vivendi during the month. Our investment thesis is dominated by our perception of the long term opportunity within Vivendi’s Universal Music Group (UMG). The global music industry has experienced a substantial decline in revenues since the turn of the century, led by the decline of physical sales. However, in the last few years, the industry has returned to growth, led by music streaming. It is our view that the consolidated content owners (Sony, UMG, Warner) are in a much better position to extract value from continued increases in streaming penetration than the distributors of content (Spotify, Apple Music etc). Partly for these reasons, we model substantial potential equity upside on a medium term view. Interestingly, Vivendi are looking to sell a portion of UMG to one/several strategic investor(s) during the next twelve months; this could potentially be a catalyst for the wider market to reappraise the implied valuation of the music business.  

January (as ever) was an extremely busy period for companies reporting. Pleasingly, many of our holding companies reported strong and reassuring numbers during the quarter. I would highlight Roche especially. We have made very good money from our position in Roche, which we established mid-way through 2018, but we see the potential for more upside from these levels; the company still trades on a very reasonable 14 x earnings and confidence around an acceleration in earnings growth is slowly seeping into the share price. 

We have had a decent start to the year in January and will continue to try to identify the best opportunities for investment in a disciplined and systematic way. 

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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