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Star manager Pease exits: Alternatives to the Henderson European Growth fund

15 October 2014

FE Trustnet highlights several alternatives to the Henderson European Growth fund, following Richard Pease’s departure from the group.

By Daniel Lanyon,

Reporter, FE Trustnet

Many fund managers have jumped ship over the past 18 months, with some of the industry’s biggest names moving on to rival firms such as Richard Buxton leaving Schroders for Old Mutual or Neil Woodford setting up a new business after departing from Invesco Perpetual.

Such a move nearly always prompts a wave of fund flows as investors look to reallocate to the manager’s new fund, rethink other options in the sector or reassess their exposure to the asset class entirely.

With the news that Henderson’s star manager Richard Pease will be leaving the business to join new venture Crux Asset Management, investors may be looking to move their money from his £1bn Henderson European Growth or €73m Henderson Horizon European Growth funds.

The manager is keeping hold of his £1.1bn Henderson European Special Situations fund and bringing it with him to the firm thanks to a deal borne from his previous business New Star at time of its sale to Henderson.

Fund Calibre has removed its ‘elite’ rating from Pease’s fund following the resignation of the manager, according to managing director Darius McDermott.

“Unfortunately we have had to remove the elite rating on this fund, following Richard’s exit from Henderson. This is with regret due to Richard’s distinguished track record as a European equities manager at Henderson,” he said.

In contrast Thomas McMahon, FE Research fund analyst, says Pease’s co-manager on the fund, Simon Rowe, has ample experience on the fund having helmed it alongside the manager since April 2009 – making no pressing need for investors to move their cash elsewhere.

“Rowe has many years of experience working on Henderson European Growth with Richard Pease, has a thorough knowledge of the underlying companies and is fully committed to the underlying process and strategy, which we do not believe will change,” he said.

“The fund’s low turnover style and clearly defined bottom-up, growth orientated approach means that Rowe should be able to take over the reins without any immediate disruption.”

“In the medium term it remains to be seen how he will handle the additional burden of managing the portfolio single-handedly, and we will be monitoring this. However, he will be assisted by Henderson’s highly successful European equities team led by John Bennett, and we rate the team and Bennett highly.”

Here we look at some alternatives to Pease’s funds for investors looking to move their cash to other Europe ex UK funds.



BlackRock European Dynamic

Mona Shah, senior analyst at Rathbones, says Pease has a unique style of running money with an emphasis on value plays and a bias to the mid cap space.

However, as the fund has a high alpha style she recommends Alister Hibbert’s Blackrock European Dynamic fund despite its all-cap portfolio due to its similar level of differentiation from the index.

“Hibbert has a different style but it is high alpha and has high tracking error with a great understanding of the macro. He is prepared to go contrarian and I remember him buying European cyclicals - automobile companies - in 2009 when they were trading on extremely depressed P/Es.”

The £1.7bn fund has been managed by Hibbert since March 2008, since when the fund has returned 88.81 per cent - the second best return in the sector - compared with the IMA Europe ex UK sector average of 24.4 per cent and a gain in the FTSE World Europe ex UK index of 28.35 per cent.

Performance of fund, sector and index since March 2008

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Source: FE Analytics

Over both three and five-year measures the fund is top decile. But it has lost 8.44 per cent in 2014, almost 2 percentage points more than the index.

Fund research group Square Mile says the fund has a larger risk/return budget, allowing more deviation away from its benchmark with greater exposure to smaller sized companies.

“The fund aims to outperform in a range of market conditions; a challenging objective for any manager to beat and may not be achievable in the short run,” Square Mile said.

“However, we think highly of Mr Hibbert who is an experienced and skilled investor. His temperament is suited to the demands of this mandate and his lengthy experience of investing through different market conditions gives him the edge one needs to run this type of strategy.”

The fund has a clean ongoing charges figure (OCF) of 0.93 per cent.


Schroder European Alpha Income

Andy Parsons, head of investment research and advisory services at The Share Centre, recommends this £300m fund despite the manager’s – James Sym - relatively short track record on the fund. He took over in June 2013.

Parsons likes the manager’s business cycle approach, which is the hallmark of the funds Schroders acquired when it bought Cazenove Capital, in the face of an uncertain European recovery.

"I'm impressed with James Sym at Schroders. He goes through the cyclicality of investing - his process follows the movement of the business cycle. To me that means it's a dynamic, moving fund that will position the portfolio depending on where we are in the cycle."

Since Sym took over the fund it is has returned 15.06 per cent compared to an IMA sector average of 3.51 per cent and a gain in index of 6.94 per cent.

Performance of fund, sector and index since June 2013


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Source: FE Analytics

Its largest overweights are financials and industrials, which make up 31.16 and 25.57 per cent respectively.

The fund has a clean OCF of 0.95 per cent and a yield of 3.7 per cent.



Jupiter European


Apart from BlackRock European Dynamic, the only other Europe ex UK fund Square Mile gives its highest rating of AAA is the £2.4bn Jupiter European fund, managed by FE Alpha Manager Alexander Darwall.

The portfolio is concentrated with between 30 and 40 holdings, in a similar manner to Pease who currently has 41 stocks.

“Darwall runs a differentiated fund which focuses on long-term growth opportunities. Intuitively this seems to be an attractive approach but others have struggled to apply the process with sufficient rigour to ensure success,” Square Mile said.

“This may sound like a potentially combustible mix but the manager's diligent research leads him into positions which have limited cross correlations and the risk profile of the fund tends to remain at acceptable levels.”

Square Mile says this is due to Darwall’s bets in quality stable businesses. The manager has run the fund since January 2001.

Over the past three years it has returned 43.73 per cent compared to a sector average of 34.02 per cent and a gain in the index of 35.51 per cent.

Performance of fund sector and index over 3yrs

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Source: FE Analytics

FE Research says Darwall’s performance since managing the fund has been outstanding, protecting investors’ capital well in 2008 and maintaining one of the top positons in the sector over three, five and 10 years.

“However, Darwall has recently increased his exposure to businesses with a large market capitalisation, which may increase the fund’s correlation to major European stock indices,” FE Research said.

The fund has a clean OCF of 1.03 per cent.


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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.