Henderson European Focus to increase focus – In its results, released yesterday evening, Henderson European Focus Trust said it had lagged its benchmark a little over the year to the end of September 2019. It returned 4.3% in NAV terms against a 6.4% return for its benchmark. Shareholders saw a return of 3.1% as the discount widened slightly. The dividend went from 31p to 31.3p.
This is, as the name implies, supposed to be a concentrated fund of the manager’s best ideas; not resembling any benchmark (or tracker fund) and taking punchy positions based on the manager’s convictions. The board wants to up the ante by changing the investment objective. Shareholders will be asked to approve amendments to the investment policy principally to reduce the portfolio range to between 35 and 45 stocks, down from its current range of 45 to 60 stocks. Shareholders will also be asked to approve an increase to the limit for stocks weighted at 5% or more of the portfolio from 40% to 50%.
Extracts from the manager’s report
“Shareholders will be aware that we like to commit a good proportion of our assets to medium-sized companies, subject to a minimum market capitalisation of GBP1 billion at the time of purchase. While this has served the Company well over the long term, the last two years have been underwhelming in this portion of the book. In particular, holdings in the “value end” of the small-mid cap space have been a drag on performance. We would highlight positions in Nokian Renkaat (1.54%), Kion (2.27%) and Tessenderlo (2.53%). It is notable that these stocks are at the cyclical end of the spectrum. Yet, despite a disappointing period of share performance we continue to back these companies. Our faith is down to a belief in their franchises, their market positions and, crucially, the valuation of their equity. In each case we firmly believe that patience will be rewarded. In the specific case of Nokian Renkaat, it may be that a change in management is required to yield the rewards we anticipate from this fundamentally sound business. This is the beauty of the closed-end structure – we don’t need to be fashion victims.
At the Company’s AGM in January 2020, shareholders will be asked to vote on proposed changes to the investment policy, the principal change being to limit the number of holdings in the portfolio to 45 stocks (reducing from the current 60-stock limit). As a shareholder myself, I passionately believe in the closed-ended structure, in the opportunities that much maligned Europe offers and, crucially, in our investment process in seeking to exploit those opportunities. Given the way that we manage money – and all the more so in a relatively concentrated portfolio – we will inevitably have periods when we will lag mainstream European indices. The past 3 years represents such a period; even if the lag is hardly a yawning gap and even if our “valuation conscious” DNA has been, at times, challenged by the momentum/growth stock zeitgeist, it has still tested patience. We understand that. Yet, we remain committed believers in the strategy’s ability to deliver over the long term. Thus, my own holding in the Company has risen to 344,765 shares as at 14 October 2019.”
thanks for info