Emma Wall: Hello and welcome to the Morningstar series, ‘Why Should I Invest with You?’ I'm Emma Wall and here with me today is Tim Stevenson, Manager of the Henderson EuroTrust (HNE).
Hello, Tim.
Tim Stevenson: Good morning.
Wall: So EuroTrust is Silver-rated by Morningstar fund, doing pretty well. You've been running it since 1992. What's changed over that time?
Stevenson: A lot has changed over that time. I think possibly the thing that is most alarming is the fact that the market seems to get evermore short term, and that seems to be a great shame after – because many companies take a long time to really get up to speed, yet the market seems to take an ever shorter term of view of what's going on. I find that sometimes quite frustrating, but equally that's how people are – or some people are making their living.
Wall: What about the sort of political background over that time? Has that changed significantly too?
Stevenson: It has changed massively, obviously. If we go back to 1992, it was Maastricht, in fact, was just being launched; sterling was in a crisis or not in a crisis; what's his name was jumping out of the bath and all the rest of it and screaming with joy. So we had quite lot of currency turbulence at that time. Then in the meantime, we got much closer European integration which has come through. Obviously, the euro is in place and so on, but we've also still got quite a lot of political tension in Europe, and that probably will continue.
Wall: Looking then at the fund and your investment strategy, you prefer a slow and steady bottom-up approach. How does that suit current market conditions?
Stevenson: Probably not ideally, because, as I said before, the market is very much in a kind of trading mode at the moment. It's jumping on things that they're saying are bad in the sort of last three months rather than looking through three months period in a difficult patch, which everybody knows is a difficult patch, to what the long term view is. So, I suspect that we're lagging a little bit to some of the faster moving funds.
But what it provides in terms of opportunities, that actually could be quite interesting, because looking at six to nine months, I think the market will gravitate back towards the sort of – more of the quality names and realize that in a low-growth world, which we're going to stay in, that these quality names will probably do a lot better. But at the moment, it's quite hard work just sort of facing up to some of the warnings that are actually going through there.
Wall: You touched on it that, looking then at the next sort of 12, 18 months, what is the backdrop for investors in Europe?
Stevenson: I think it's good. There's sort of as usual good news/bad news story. The good news is, the companies are certainly doing very well and doing much better, and they're very well-positioned on a global basis. So we're getting very good news from the companies in terms of how they're building out their positions.
The bad news is, I think there is going to be political uncertainty in Europe on a sort of six to 12 months view. We've got the euro elections coming up – European Parliament elections rather coming up next May. I think that could lead for sort of one or two radicals to sort of make that point, and there's going to be a low turnout, because there always is in that. So, I suspect we could get a bit more political turbulence in Europe.
But at the same time, back to the good news, the economies are definitely recovering, and that's the crucial thing that European economies are recovering. Unemployment is beginning to come down. So it looks like the worst has passed in terms of the adjustment process that Europe had to start making.
Wall: So it's just a case of investors holding their nerve then?
Stevenson: I think it is, not being too greedy. We've obviously had a very good 12 months and I don't think it would be realistic to expect another 12 months ahead there's going to be the same sort of order. But I see the European markets still have sort of kind of – hopefully a sort of 10% total return potential over the long term. I think that's very attainable, if not from current levels, but if the markets have a little bit of a setback. Then certainly from that level, I'd feel very relaxed about it.
Wall: Tim, thank you very much.
Stevenson: Thank you.
Wall: This is Emma Wall for Morningstar. Thank you for watching.
