Henderson’s Bennett tempers excessive Europe optimism

John Bennett 450

Henderson European Selected Opportunities fund manager John Bennett has eased back on his “very positive” outlook for European equities in light of the movement in valuations.

Over 12 months to 19 June 2013 the FTSE Europe ex UK Index has risen 32.7 per cent, according to FE Analytics, outpacing the 20.2 gain seen in the FTSE 100 and the 23.3 per cent rise in the MSCI World.

In its latest update, the manager of the £1.45bn fund notes that he was highly positive on European equities a year ago but has since found reason to “temper any excessive optimism” more recently.

Bennett explains: “The reason is simple: price. Prices and valuations have come some way from the lows of early June 2012. At the very least we expect markets to be tested in the coming weeks and months. Indeed we would worry if no such test arrives.

“For sure we find it difficult to join the throng of ‘melt up…buy beta…risk on’ which seems to have grown louder as the market has risen – just as it grows quieter as markets fall.”

The manager also warned that his fund is likely to underperform if improving economic data allows the rotation away from staples, yield and growth stocks towards cyclicals and beta to continue.

However, the fund outperformed in May, returning 3.5 per cent against the 3.2 per cent rise in the FTSE Europe ex UK benchmark.

“For our own part, we suspect that a vigorous economic recovery remains some way off,” he adds.

Henderson European Selected Opportunities’ cumulative performance to 19 June 2013

Fund 1.31% 15.10% 40.09% 37.98% 35.12%
1.48% 14.07% 36.44% 30.98% 21.65%
-0.17% 0.90% 2.67% 5.35% 11.07%
  56 / 105 38 / 104 16 / 103 18 / 99 19 / 87
3 2 1 1 1

Source: FE Analytics