With ‘change’ a core investment philosophy, the manager was recruited specifically from Morgan Stanley’s global equities team in September to take over this fund. O’Neill will remain closely involved with the team.
Volckaert said he was looking forward to enjoying the benefits of stickier assets in running his first closed-ended portfolio, bringing his 13 years’ open-ended experience in global equities, having held worked at ABN Amro prior to Morgan Stanley.
“There are a lot of good opportunities to explore. Closed-ended strategies fit with the way I like to invest. Your assets remain with you for longer, you never have to be a forced seller and you tend to have a more captive investor base.”
He said he hoped discounts would fade and was encouraged by the RDR’s impact for the closed-ended space by attracting new investors to the structure.
Henderson Global was currently trading on a discount of 10.4%, with long-term numbers estimated as 11.1% NAV total return since O'Neill took it on in 1983. That said, over the last three years it has dropped off comparatively, with a 13.6% gain against the MSCI All World's 20.8% and 21.5% for the peer group, according to Numis.
Wrong time to gear
Having agreed with the board against using a strategic gearing facility, he said he was not averse to bringing in a degree of gearing (the trust allows up to 15% of net assets), but now was not the right time.
Speaking to Portfolio Adviser, he said it would require “a more visible economy, the steam being let out, and sentiment, which has got too elevated, would need to come down for me to consider any degree of gearing.
“I wish it was 2009 and I could take it out then, but it’s 2014, and it wouldn’t be a good idea,” he half-joked.
Relieved that the various tail-risks which plagued 2013 have eased, the manager said he expected a slowdown in European growth and was keen on the domestic opportunities on the continent, a rich hunting ground he would take advantage as part of his planned rebalancing in terms of the geographical breakdown of the portfolio.
He also was keen on the US, having already brought in Crown Holdings and Western Digital: “One is a steady eddie and the other brings the sex and violence. They’re a nice complement and both offer compelling, if very different, investment cases.”
Backing Rentokil
Rentokil, which has seen a change in CEO and is now set to reap the benefits of years of restructuring as it rationalised its business, could see its share price rise a further 50%, based on his more bullish estimates.
“Rentokil has been 'turning around in the next 18 months' for about the last three or four years. Many investors simply got tired of waiting.”
He said the short-term volatility had presented an opportunity and while he bought the stock on 10x earnings, it was it was now at 12x.
“Back in 1999 it was trading at 33x, you just needed time for that multiple to deflate, but it’s been underperforming for about 15 years.”
He said while many investors hoped to find the winners – the Microsofts and Berkshire Hathaways in their infancy – the opportunities were too rare.
He said remaining loyal to his ‘change’ philosophy while taking a longer term view would pay dividends.
Sharing O’Neill’s bottom-up stockpicking approach, looking at upside and downside equally and concentrating the portfolio to roughly 60 names, he plans to benefit investors through consistency of style while bringing a personal touch, he said.
Volckaert expressed concerns over the increased short-termism of markets.
“Now you have so many new investors, we have hedge funds and quant traders, higher volatility over the last 13, 14 years. There is so much information and everyone’s reacting to that information. There is too much competition. If you take a longer term view, there is less competition, you can build a position in amongst that volatility rather than fear it. The market struggles with change and its effect on cash flows, but by taking a longer term view you get different numbers to the rest of the street which can throw up some positive surprises.”
Numis said: “We do not feel that the change in manager is a reason for investors to be concerned. The same focused stock picking approach will be employed, and we feel that the strategy to move to a truly global portfolio makes sense.
“However, Henderson Global is one of the smaller Global Equity investment trusts and we believe that it needs to deliver strong NAV returns if it is to attract investor demand.”
