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12 May 2017updated 09 Sep 2021 5:27pm

The Interview: John Bennett on European markets

Janus Henderson's Director of European Equities, John Bennett, on how to deal with political challenges. 

By Janus Henderson

Can you describe the Trust?

Janus Henderson European Focus Trust invests across a range different size companies, mainly in continental Europe. It looks for capital growth rather than income paying assets, and is a focus portfolio, so will invest in between 50-60 stocks. I’ve been managing the Trust since 2010.

Why should Europe be considered by investors currently?

I think if investors do consider allocating to Europe they should do so in the belief that the world, before Brexit, before Trump, was moving globally from a growth to a value market. Growth stocks are those that have the potential for strong growth of earnings in the future, and will tend to be favoured by investors in markets where economic growth is perceived to be low or slowing. Value stocks are those that appear to be under-priced relative to their fundamentals, so sales or revenue and so forth, and will tend to be favoured when growth is perceived to be stronger or growing.

So value favours possibly Japan, but I think that it also favours Europe versus what has been the long-term lead market which, in performance terms, is the US. Europe is much more of a value construct. That is why investors should look at Europe right now. Value is back. And I do find it instructive that the Stoxx 600 as a proxy for Europe has outperformed the S&P since Trump. So I think if you are of a mind to buy value, you’ll find it in Europe.

Is your investment approach suitable for current market conditions?

We certainly hope our approach is suited to current market conditions. I think they key aspect of our approach is that we are not style-specific. I don’t like getting stuck in a style cul-de-sac, where investors say I’m either a growth manager or a value manager. So we tilted quite early towards value, over the last 12 to 15 months. And so if we’re right that value is back, and Europe is back, and Europe is actually going to outperform this year, then I think we are correctly positioned. Because we are the most tilted to value we have been in some considerable time.

Where do you see the most compelling opportunities?

The most compelling opportunity for me in Europe right now is value. The most difficult to own is banks. This is probably the poster child sector of European value investing. They have been an optical illusion of value for about a decade. We think that is changing. So if you can stomach volatility (and I do condition it that way, because I see so many investors running away from volatility over the last ten years, which really intrigues me – I think it is the wrong thing to do); if you can embrace volatility, then I think European banks are going to surprise on the upside.

How important is politics for European equity markets?

I think the French election is another classic example of a Brexit situation, a Trump situation, the Dutch man with the bouffant hair (Geert Wilders) – who failed to win the Dutch election – situation, the Austrian election, the German election. I think they are all one and the same – a just another brick in the ‘wall of worry’. They are reasons for investors to worry – I don’t think we should be complacent about these events – but I think every manager should be asked “what value do you have to add in guessing the outcome to an election”. And even if you knew the result of that election, by goodness look at Brexit and Trump, if you knew the result you very probably would have set up the wrong portfolio. So I would say to investors, ignore it, because you can’t add any value.

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Nothing in this document is intended to or should be construed as advice.  This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. Issued in the UK by Janus Henderson Investment Funds Limited (reg. no. 2678531), incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE, is authorised and regulated by the Financial Conduct Authority to provide investment products and services. 

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