Henderson European Growth Fund research update

Kate Marshall | Fri 29 January 2016

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2015 finished with investors once again focused on the actions of central banks. In the US, the Federal Reserve made its move to increase interest rates for the first time in almost a decade. Elsewhere in Europe, the European Central Bank (ECB) cut rates further into negative territory and extended the duration of its quantitative easing programme.

While European markets ended the year positively, 2016 began with a sharp selloff in global stock markets led by continued concerns about China and further falls in the oil price.

Simon Rowe, manager of the Henderson European Growth Fund, is aware of the impact of slowing economic growth in China, but he does not believe the underlying picture for Europe has changed significantly. Indeed, recent manufacturing surveys for Europe have been positive and, as I write, European equities have rebounded someway following comments from ECB President Mario Draghi that a further round of QE could be unleashed in March.

Looking ahead, Simon Rowe believes individual share price performance will depend on the quality of a business, the talents of its management team and its opportunities for development, rather than wider economic factors. He favours businesses he believes will prove resilient in a variety of market conditions, focusing on those with strong balance sheets and recurring revenues.

2015 was a strong year for the fund helped by good stock selection, according to our analysis, while a low exposure to energy stocks also proved beneficial. Throughout the year the manager took profits from some of the fund's strongest performers, and initiated a position in Dometic, a niche provider of fridges and toilets for camper vans. Please note, as a concentrated portfolio each holding is able to make a significant impact on potential returns although this strategy also increases risk.

Our view on this fund

Simon Rowe assumed sole responsibility for this fund in October 2014 since which point the fund has returned 24.3%* compared with 18.2% for the average fund in the sector, although past performance should not be seen as a guide to future performance and this is only a short time period. He previously co-managed the fund from April 2009, although we feel the fund's other previous co-manager, Richard Pease, played a significant role in the fund's performance over this time.

Past performance is not a guide to future returns. Source Lipper IM* to 04/01/2016.

We like Simon Rowe's focus on high-quality, well-managed, and attractively-valued companies, which we believe could deliver good long-term returns. Given the manager's approach, we would expect the fund to hold up relatively well in weaker markets, but lag a rising market. Presently the fund does not feature on the Wealth 150 list of our favourite funds across the major sectors as we would prefer to see how Simon Rowe fares as sole manager for a prolonged period.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.