Fund Manager commentary - Henderson EuroTrust



​February saw a continuation of the sharp year-to-date rally in global equity markets. European equities climbed in February led by the slightly strange combination of Healthcare alongside a number of more cyclical sectors (Basic Materials, Industrials, Financials and Technology). The Trust had a strong month, with outperformance being driven by stock specific factors, namely strong 2018 results from a number of our key positions.  

February was a relatively quiet month for trading activity and so I will spend some time discussing a position that we initiated in January; Aeroports de Paris (ADP). We would categorise this as a ‘Special Opportunities’ investment. ADP operates the three main Paris airports; Charles de Gaulle, Orly and Le Bourget. The business thus mainly derives revenues from the circulation of passengers and cargo, the operation of real estate and retail outlets. We see ADP as a high quality business; a defensive and fairly predictable play on the structural growth in air traffic. However, our primary interest in ADP as an investment is based around the prospective sell-down by the French State who currently own just over 50% of the business. We believe that this sell down will happen (there is some debate over this) and that it will happen at an attractive enough price to enable a strong annualised return from our investment. 

As a reminder, ‘Special Opportunities’ tends to be the smallest of the three investment categories that we will consider. We tend to spend more of our time trying to identify ‘Compounders’ and ‘Improvers’; the former is where we see returns as being high and sustainable and the latter is where we have identified the potential for returns to materially improve over the medium term. 

As mentioned above, February was characterised by generally strong 2018 results from a number of our key positions. I will highlight a couple of these. First, Vivendi (a position that we initiated in January) reported 10% organic revenue growth from its music business, UMG, in Q4. Their streaming revenues are growing at over 40% which, in our view, bodes very well for the ongoing initiative to sell a strategic stake in this business. Second, it is worth mentioning Nestle. This is a high quality (‘Superior Returns’) business that is displaying accelerating organic growth (3.6% in Q4), strong margin progress in line with medium term objectives and progress on the disposal of non-core businesses; we have maintained a decent-sized position. 

We have had a decent start to the year 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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