The Henderson European Focus Trust invests mainly in large companies in Continental Europe with the objective of increasing the value of shareholders’ investments.

What does it do?

The Trust aims maximise the return for investors from both capital and income by investing mainly in companies listed on stock exchanges in Continental Europe which does not include investments in the UK. It has a focused list of investments which means between 50 and 60 companies and is not managed according to benchmark.

How does it do it?

The Trust is not managed by simply investing in companies which are in a benchmark or index. Instead the manager makes investments based sector themes and stock specifics. This means he looks for companies within a specific sector, for example pharmaceuticals, based on a conviction about the future demand for products in that sector, whilst at the same time making decisions about other companies based on their merits alone.

The companies in the portfolio are based in mainland Europe and not in the UK, and tend to be larger companies. That said because of the way an investment trust is structured it can also invest in some smaller European companies. Smaller means less than a €1bn in size.

Why do John and Andrew do it?

In my view, every fund manager needs to understand his DNA and what drives him. For me it’s about looking for change. We call them inflexion points. Yes, we have to make sure we buy companies on our terms, at the price we want to pay, but after that it’s all about looking for companies or sectors which are in a period of change. It could be a change of management, a change in direction, a change in demand for their products and services – any of these things are what makes me and my team interested and I believe is what has the best potential to drive returns for investors.

One of things I enjoy most is our weekly manager meeting. Not that I like meetings much at all, but this one is critical and is something I started when I came to Henderson. It means we share ideas across the whole of the European team and I can gain for the expertise across the business. Our in house analysts present ideas and pitch stocks that could be possible investments.

One of the types of meeting I do like is when I meet the companies we invest in. That for me is all about interpreting information and is a key part of the investment process.

What are the Risks?

Share prices go up and down. If you sell your shares at a lower price than you bought them, you will have lost money. You should be comfortable with this risk before investing. See Step 2 for more information on risk, if you haven’t already.

Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.

This Trust is suitable to be used as one component in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this Trust.

The return on your investment is directly related to the prevailing market price of the Trust’s shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Trust. As a result losses (or gains) may be higher or lower than those of the Trust’s assets.

Where the Trust invests in assets which are denominated in currencies other than the base currency then currency exchange rate movements may cause the value of investments to fall as well as rise.

The Trust may borrow money (gearing) as part of its investment strategy. If the Trust utilises its ability to gear, the profits and losses incured by the Trust can be greater than those of a Trust that does not use gearing.

Source: Morningstar