Investors in the Henderson Euro Trust should not be concerned by the retirement of Tim Stevenson, according to the manager himself, who says his replacement Jamie Ross is “head and shoulders” above him.
Stevenson has headed up the trust since launch in 1992. FE Analytics data on the portfolio goes back as far as July 1995, over which time it has made a 1,552.3 per cent return compared with 1,119.72 per cent from its IT Europe sector and 506.74 per cent from its FTSE World Europe ex UK benchmark.
Performance of trust vs sector and index since July 1995
Source: FE Analytics
When any manager decides to “hang up his abacus”, as Stevenson (pictured) puts it, after this length of time, it naturally leads to questions about key-man risk and whether the vehicle can maintain its performance – especially when it has done as well as Henderson Euro Trust
.
However, Stevenson said that while it would be difficult to simply hand over the running of the trust to someone else under normal circumstances, the “immensely strong” European team at Janus Henderson and the manager’s 11-year working relationship with Ross should make the transition as seamless as possible – a sentiment echoed by his successor.
“When I joined Tim [as co-manager] two years ago now, there was no question that I would have joined him unless I had a similar style,” said Ross.
“We’ve sat around a desk for 11 years and you get to know someone pretty well over that sort of time. You share company meetings, you share analyst meetings and you discuss companies the whole time, so for me that was a key reason why I wanted to join Tim.
“Speaking on Tim’s behalf, part of the reason he chose me was because he saw someone who thought about companies in a broadly similar way.”
This is not to say the two managers don’t have their differences. Ross said there is discussion and debate about individual stocks over which he and Stevenson disagree, adding “it would be very weird if that wasn’t the case”.
“But the overriding philosophy, process and style and all those things will remain the same under my tenure as they have been under Tim’s,” he said.
Stevenson agreed there are differences between the two, but he said that any changes that Ross makes to the management of the trust may represent an improvement on his own way of doing things.
For example, he said that he has had the fortune to work with some “very clever analysts and other colleagues” over the years who have advised him on whether a company is well-managed or attractively valued, for example, before he has made a judgment on whether to invest.
However, Stevenson said that apart from being “far better trained and educated than he is”, Ross is also capable of conducting detailed analysis himself rather than delegating it to others.
“He can look at these companies and he can actually get to the bottom of that return on equity number and say, ‘the reason it has that better return on equity is because it has this, this, this and this, and this is why that may increase or it may fade or stay the same’,” Stevenson explained.
“And that, I think, is a tremendous advantage. Some of the things that have made a big contribution to performance over the years such as Assa Abloy, ASML, these are all things that Jamie said, ‘come on, these should be in the portfolio’.”
He added: “And the one thing I would say is that with Jamie’s training, as with all the analysts that we have got, is that he is head and shoulders above me. And I thank my lucky stars every day I don’t have to start in this industry today because I wouldn’t have a prayer, I really wouldn’t.”
In Henderson Euro Trust’s annual report, chairman Nicola Ralston said the board considered the change of manager in some depth before coming to the conclusion that Ross “brings a combination of investment experience, personal characteristics and a strong belief in seeking quality, growth and consistency”, which makes him the right person for the role.
“I would also like to point out that Jamie is of a similar age to Tim when he became fund manager in 1994,” she added.
Henderson Euro Trust aims to provide “growth, quality and consistency” for investors, which it does through investing in three types of company: compounders, which are businesses that have been and look set to continue delivering consistent and high returns; improvers, which are on their way to achieving compounder status; and special opportunities, which are as the name implies, but also include a source of income.
Stevenson said the evidence over the past year suggests that the economic situation in Europe is as good as it is going to get, but he is relatively unconcerned, pointing out that his portfolio holdings derive less than 40 per cent of revenues from the continent's mainland.
He added that, while there are likely to be more challenges ahead over the next year, profit growth should remain supportive.
“In this climate I continue to believe that good quality companies which reliably invest in the further growth of their business will still do well,” he concluded.
Henderson Euro Trust is on a discount of 7.71 per cent compared with 6.19 and 5.59 from its one- and three-year averages. It has ongoing charges of 0.83 per cent and is just 1 per cent geared.