Many European companies have spent the past few years strengthening their balance sheets, raising cash reserves and limiting their borrowing requirements. John Bennett, manager of the Henderson European Selected Opportunities Fund, believes investors willing to take a long-term view will be rewarded by strong returns from this bruised yet attractive market. Despite the wider economic issues, the earnings of European companies have remained robust, although for many this has failed to be reflected in their share price.
John Bennett seeks to identify those companies where a positive earnings outlook has failed to be acknowledged by the market and invests in sectors which he feels are unjustly unloved. He believes there is potential for share prices to rise should investors recognise their ability to remain resilient throughout difficult market conditions.
One sector where John Bennett sees significant long-term growth potential is healthcare. At present, 25% of the portfolio is invested in the sector. Over recent years, John Bennett has seen an improvement in the quality of management of several pharmaceutical companies. The sector could also benefit from an increase in drug approvals, which has been aided by easing regulatory pressure from the European Medicines Agency and US Food and Drug Administration. The fund's top holdings currently include Novartis, Roche and Sanofi.
Conversely exposure to the telecommunications sector is limited. The profits of phone operators have been affected by an increasing use of free services available on internet-enabled phones. For example, SMS (Short Messaging Service) is highly profitable for wireless operators but its use is being threatened by competing messaging services available on smartphones. Telephone calls are also increasingly less common and John Bennett believes this trend towards mobile messaging platforms has further to go.
John Bennett is an experienced manager in managing European equities and has a fairly consistent track record. He took over management of this fund in February 2010, since which point the fund has returned 20.5% compared to the sector average of 13.9%*. Please note past performance is not a guide to future returns. However, the European sector is home to some outstanding managers, and the fund does not currently feature on the Wealth 150 list of our favourite funds across the major sectors.
|% Growth 01/01/08 to 01/01/09||% Growth 01/01/09 to 01/01/10||% Growth 01/01/10 to 03/01/11||% Growth 03/01/11 to 02/01/12||% Growth 02/01/12 to 01/01/13|
|Henderson European Selected Opportunities Fund||-18.8||18.0||4.3||-11.0||20.4|
|IMA Europe ex UK||-24.6||19.4||8.4||-15.6||18.9|
Past performance is not a guide to future returns. Source: Lipper.* Figures 01/01/2008 to 01/01/2013.