Suits investors looking for long-term capital growth from well-known and interesting European brands. Many of the companies held in the portfolio are well known in the UK, such as Nestlé and Heineken, but are not always easy to invest in directly.
The company aims to achieve a superior total return from a portfolio of high quality European investments. Henderson EuroTrust plc invests predominantly in large and medium-sized companies which are perceived to be undervalued in view of their growth prospects or on account of significant changes in management or structure.
Markets eked out another small gain in April, nervously progressing in the face of continuing poor economic news and a mixed political backdrop. The process of a rerating of equities continues, on optimism that economic recovery will start to come through later this year, and perhaps given a growing reluctance to invest in other asset classes. Politics has been somewhat tortured during the last few weeks, but also quite significant. Italy, finally, has a government led by the widely respected Mr Letta, after Mr Napolitano’s reluctant return to the post of President. Mr Napolitano’s angry wake-up speech to politicians was a useful reminder that Italians themselves know what is needed. We also saw European Commission President Barroso join the growing bandwagon of ‘austerity cannot create growth’ calls; there is an increasing feeling that we could be about to move into a more positive growth impetus stage. Quite how this is created is of course not yet clear, but the timing is useful, as Germany will not wish to play too hard a line ahead of elections in September.
We have had quite a busy month, and have added to our banking sector exposure. At the quality end of the sector we added Barclays, which we believe will achieve a decisive turnaround, while additions in our ‘trading book’(which will not exceed 5% of the total fund) included Unicredit and Credit Agricole. Both Italy and France remain quite vulnerable with weak economies, but we feel that this is reflected in the extremely low valuation levels for these two banks. We sold AstraZeneca out of the trading book following some modest gains. We also sold Continental, as we feel the sharp devaluation of the yen could put some pressure on some areas of highly successful German industry at a time when auto sales are still very weak. We also sold Petrofac, the oil services company.
There is a two-way pull in sentiment: investors are cautious due to economic weakness and dull results, but optimistic due to low interest rates and growing confidence that growth will resume in the second half of 2013 and into 2014. In the markets buying on weakness continues and, interestingly, poor results have in many cases been met with rising share prices, especially where analysts and investors have chosen to focus on improving order books. As always there are likely to be volatile days, but the overall trend looks to be better, and we are maintaining an almost fully invested stance.