From the Greek debt crisis to the EU referendum, there has been no shortage of economic issues for investors to fret over. Rather than focus on factors beyond his control, John Bennett, manager of the Henderson European Selected Opportunities Fund, prefers to concentrate on the prospects, cash flows, and valuations of individual companies.
Against a backdrop of ongoing economic uncertainty in recent years, many investors have favoured the perceived safety of companies with defensive qualities that are expected to deliver sustainable sales and earnings growth. The share prices of companies in the consumer goods sector, for example, have performed strongly, although their valuations now appear less attractive. While the fund has meaningful exposure to this sector, John Bennett is unlikely to increase this much further given the valuations on offer.
Source: Henderson, correct at 31/07/2016
More recently the manager has tilted the portfolio to areas of the market he feels offer greater value. He has specifically focused on ‘self-help’ situations – companies where internal positive change could lead to improved long-term profitability. Current investments include Danish facilities group ISS, which John Bennett believes has the potential to offer steady growth and an increased focus on cash generation that could lead to improved shareholder returns.
The manager has also increased exposure to the oil & gas sector. A combination of excessive spending, inefficient management, and falling oil prices has taken its toll on oil companies in recent years. In line with falling share prices, these businesses look increasingly good value. They are also making efforts to improve by cutting costs and replacing senior management. John Bennett aims to take advantage of any recovery by investing in companies such as Total, BP, Statoil and Eni.
Elsewhere, the fund maintains a bias towards the healthcare sector. Pharmaceutical company shares came under pressure towards the end of last year after comments from US presidential candidate Hillary Clinton about excessive drug price increases. Investors were subsequently concerned about the future profitability of the industry, but John Bennett remains positive in his longer-term outlook. In his view, those companies that continue to create innovative medicines meeting clinical needs will maintain their ability to charge premium prices. Current investments include Roche, Novartis and Fresenius.
Our view on this fund
John Bennett is a highly-experienced manager of European equities with a track record spanning 28 years. He assumed responsibility for the Henderson European Selected Opportunities Fund in February 2010, over which time the fund has grown 91.6%* compared with 62.1% for the FTSE World Europe ex UK Index. Please remember past performance is not a guide to future returns.
|Annual percentage growth|
| August 11 -
| August 12 -
| August 13 -
| August 14 -
| August 15 -
|Henderson European Selected Opportunities||-6.4%||37.6%||5.7%||14.2%||6.6%|
|FTSE World Europe ex UK||-10.7%||36.4%||2.9%||10.2%||7.0%|
Past performance is not a guide to future returns.
Source: *Lipper IM to 01/08/2016
Our analysis suggests the fund’s outperformance has been driven by a combination of good stock selection and sector allocation. While the manager tends to focus on individual stock selection he will also incorporate themes into the portfolio, which has led to the current bias towards healthcare companies.
This fund does not currently feature on the Wealth 150 list of our favourite funds across the major sectors. We rate John Bennett as a quality fund manager and would expect him to deliver good returns for investors over the long term. That said, we currently have higher conviction in other funds that are currently included in the Wealth 150.