Emma Wall: Hello and welcome to the Morningstar series "Why Should I Invest With You?" I'm Emma Wall and I'm joined today by Wouter Volckaert, Manager of the Henderson Global Trust.
Hi, Wouter.
Wouter Volckaert: Hi.
Wall: So, the Global Trust has a pretty nice dividend at the moment, about 2.8%. But if we take that out of the picture, although investors won't want you to, looking just at the share prices, it's been a pretty flat year with some volatility in the middle. What's caused that?
Volckaert: Currency movements are the biggest driver behind that flat performance. We've got pretty good stocks and we generated pretty good dividends and we paid out pretty good dividend yields. But it has been a very strong year for the pounds and we are a global trust, we are truly global trust. Over 90% of our assets are invested throughout the world. Therefore, the assets that we have in euros or in emerging market currencies have been a bit weaker this year.
I expect that next year that might turn around a bit because of course we're going into the so called Brexit year. We'll have that overhang throughout 2016. So, I might see a bit more weakness in the pound and a bit more strength in the euro, for example, and therefore, I think 2016 will be a better year in that regard.
Wall: Looking at 2016 and the portfolio makeup, at the moment about 50% of the portfolio is in the U.S. Is that an area that you would be looking to trim from because of course it has had a stellar run? Dollar is extremely strong. Can we expect more of that going forward?
Volckaert: Well, we still kike the U.S. because we do have 50% of our capital there. When I look at the world from a top-down perspective, I'm starting to warm up a bit more towards Europe and even some selective emerging markets. So, we've been reallocating a bit of capital and the reason to like Europe is because it's cheaper markets, the currency has bottomed or at least we're in the bottoming process and there is more room for earnings growth because we're starting from a much lower level.
Whereas in the U.S. the market is a bit more expensive, earnings growth might be a bit more difficult because all the earnings that you import from abroad are imported at lower currencies and also, corporate profit margins are quite high in the U.S. So, from a top-down point of view, there are reasons to allocate a bit more money towards Europe or other parts of the world. However, as a fund manager we also have to look at the world bottom-up and bottom-up I find – when I look at Europe, if I want to take advantage of cheap Europe, I have to go for Greek stocks; I have to go for cheap Southern European banks.
Wall: And your shareholders may not thank you for that.
Volckaert: That might not necessarily be the way or the area where you want to invest and defensive stocks are very expensive in Europe. They are 98 percentile, so meaning throughout the history it's only 2% times that they have been more expensive and that's because we haven't had growth in Europe for the past seven years. So, people have been hiding in these safe places.
The U.S. is exactly the opposite. We've had a bit of growth over the past years in the U.S. and people have jumped on board of the very high growth stories, the Netflix of this world, the Amazons and they have done very well and they are very expensive.
And quality and defensive has been ignored a bit. So you can actually pick up some quality stocks for a reasonable price in the U.S. So, when I look at the portfolio holistically, I still find quite a few stocks in the U.S. that I'd like to own and that's why we continue to have quite an exposure there.
Wall: You did mention that you will be trimming mode in order to allocate towards selective emerging markets. Which ones are you selecting?
Volckaert: The Asia over Latin America. I was in Brazil two weeks ago and things are bad and they are getting worse over there. But in Asia we're seeing some signs of pickups or improvements in certain sectors. So, we're allocating a little bit more capital over there.
Wall: Wouter, thank you very much.
Volckaert: You're welcome.
Wall: This is Emma Wall for Morningstar. Thank you for watching.
