Investment Companies News

Tim Stevenson broke his five year run of outperformance at the helm of the £126m Henderson Eurotrust as he failed to keep pace with booming markets.

On the face of it, shareholders can’t be disappointed with a net asset value return of 16.6% and a total return of 17.8% for the year to 31 July. But the trust’s FTSE Europe (ex UK) benchmark did even better, returning 21.5%. The trust will pay a final dividend of 4p, making its total dividend 6p per share for the year.

The trust has seen the attention of arbitrageurs over the period.

Chairman Stanislas Yassukovich says: 'During the year shareholders approved proposals that the company will offer an exit opportunity to shareholders in 2010. At the time of doing this, we undertook to purchase up to 14.99% of the company’s shares to hold in treasury or cancel at the director’s discretion. A number of arbitrage players took advantage of this opportunity and these contributed to the reduction in the size of the company by 9.2%.'

The trust focuses on large and mid cap companies across Europe. Recent weakness has come from the portfolio’s financial names, though Stevenson has reduced exposure through the sale of Marfin Financial. Global healthcare group Fresenius AG has also knocked performance, but recent above-expectation results and an upgrade in its earnings outlook have convinced Stevenson to retain his holding. Fresenius and Fresenius Medical Care are currently the second and third largest holdings in the fund.

Industrials are the largest sector overweight at 26.1% of the portfolio. Germany is the largest country position at 21%. Switzerland is also a large overweight, particularly after strength in Nestle.

The managers are unruffled by the set back in markets, believing that companies are performing well within a favourable economic environment. The possibility of more difficult markets over the next 12 months appears to have been reflected in forecasts and valuations. However, for the time being the trust is retaining an historically high cash position at 3.9%, waiting to take advantage of select opportunities.

The trust currently trades on a discount of 10.9%, which is at the top end of its range. It may offer an advantage to pick up a strong, consistent performer when sentiment is against it.