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Buy into the reopening at a reasonable price via Janus Henderson European Focus

Janus Henderson European Focus is focused on an unpopular market
Buy into the reopening at a reasonable price via Janus Henderson European Focus
  • European equities look relatively cheap and could be in a position to recover this year
  • Janus Henderson European Focus' managers have positioned it for an economic reopening
  • The fund is concentrated and contrarian, but has a good performance record

After recent market rallies, equities – in particular those in the US – appear expensive. So if you are looking for a better priced area of developed markets it could be worth turning to Europe. MSCI Europe index is trading at close to an eight-year low versus MSCI AC World index ex-US, according to Grahame Secker, equity strategist at Morgan Stanley, so now looks cheap even if you exclude US peers. “Europe should be less vulnerable to any broader sentiment reversal given lower levels of froth,” he adds. “While we have seen very strong inflows into US and emerging equity markets, recently Europe has seen small outflows.”

The Euro Stoxx 50 index of eurozone blue-chips had outperformed the S&P 500 for six consecutive weeks, as of 26 March, for the first time since 2017. And Secker expects recent outperformance to persist. Europe should see an improvement in its relative economic momentum over the coming months as global data peaks and European newsflow picks up from recent lows. Further out, Europe is likely to be the only major economic region to see gross domestic product (GDP) growth higher in 2022 than 2021.”

Despite this, he believes that investment opportunities among European equities have narrowed in recent months and sees “few remaining sources of double-digit upside from here."

So if you are going to add Europe exposure, it would seem particularly sensible at the moment to do this via an experienced manager with a proven strategy for picking out select companies that deliver good returns.

A good option could be Janus Henderson European Focus Fund (GB00B54J0L85), which since 2010 has been run by John Bennett, a highly experienced investor with over 30 years of financial industry experience. Tom O'Hara has been a co-manager since January 2020.

They seek to capture opportunities across all types of market conditions, and invest in well-known larger-cap and under-researched mid-cap companies. They select holdings along the lines of sector themes and due to their own merits, aiming to tap into sustainable long-term growth trends. They seek to generate returns via both growth and income over five years or more.

Bennett and his team typically have a bias to contrarian investing, so Janus Henderson European Focus could be a good option as Europe has not been popular with investors. Identifying a catalyst for change in a potential investment is an important part of Bennett and his team's investment process. They concentrate on under-researched stocks where they think that they can add the most value.

They have recently tilted the fund to what they describe as a "reopening strategy” and commented: “This has meant a degree of profit-taking in some of last year's winners in the industrial sphere, in favour of selected consumer names. Joining the latter is our recent purchase of a position in Norway-based Mowi (NOR:MOWI), a global leader in salmon farming. We expect the company to be a beneficiary of the reopening of the hospitality industry.”

Their investment process involves considering global market and industry dynamics and meeting companies, which gives them an overall insight. This leads them to different sector themes, helping them to narrow their investment universe down to the areas they think have the greatest potential.

“Bennett's pragmatic approach means he considers the overall macroeconomic environment and sector trends, as well as the criteria of individual companies – a style that has led to strong performance since his tenure began,” comment analysts at research company FundCalibre. “The team is structured in such a way that it can focus on the areas where it can add most value, and invest early enough and with enough conviction in a stock to maximise the investment opportunity.”

The fund is relatively concentrated with 44 holdings at the end of February, so a relative lack of opportunities is arguably less of an issue for it than one with more holdings – as long as its investment team continues to pick the right ones.

A recovery in Europe could take some time to emerge due to many countries in that region making a slow start in providing coronavirus vaccines.

Being relatively concentrated increases risk because if a holding does not do well it will have a greater effect on the fund’s overall return than it would on that of a fund with a greater number of holdings. The fund had more than 5 per cent of its assets in each of its two largest holdings at the end of February, something that could become more common due to its managers' decision to increase concentration to improve the active characteristics.

The fund also takes stock and sector positions that are significantly different to European equity indices, so could deliver a very different return profile to them. This and its contrarian approach have resulted in periods of underperformance – something that could occur again.

However, slow vaccine deployment in continental Europe is likely to be a short-term issue with supplies set to increase in the second and third quarters, after which the economic picture could improve. And, in any case, the fortunes of companies do not necessarily follow those of the countries in which they happen to be listed. European listed companies include successful international businesses that make their earnings around the world and could, for example, benefit from pent-up consumer demand as economies reopen, including in areas such as emerging markets.

The select and concentrated nature of this fund’s holdings mean that its fortunes will depend on them rather than the broad economic situation. And it will benefit more from one investment doing well than a fund with a larger number of holdings would.

Despite the concentration, analysts at FundCalibre also point out that Janus Henderson European Focus is carefully constructed to be well-diversified and no one holding can exceed 10 per cent of assets. The fund invests in companies in a variety of industry sectors listed in a number of countries, although mainly in northern Europe.

While investing in this fund incurs a number of risks, if you have a high risk appetite and long-term investment horizon you should be able to ride them out and in time benefit from good returns. So if you are looking to add to developed market exposure, and capture any upturn and long-term growth, Janus Henderson European Focus still looks like a good way to do this. Buy. 



Janus Henderson European Focus (GB00B54J0L85)
Price282.2pMean return9.26%
IA sector Europe ex UKSharpe ratio0.52
Fund type Open-ended investment companyStandard deviation16.02%
Fund size£226.04mOngoing charge0.86%*
No of holdings44*Yield0.94%
Set-up date31/01/01*More
Manager start dateJohn Bennett 01-Feb-10/Tom O'Hara 31-Jan-20**
Source: Morningstar as at 29 March 2021, *Janus Henderson, **Trustnet.


Fund/benchmark1 year total return (%)3 year cumulative total return (%)5 year cumulative total return (%)10 year cumulative total return (%)
Janus Henderson European Focus41.2434.0072.18173.75
FTSE Europe ex UK index29.2226.9365.4893.14
MSCI Europe ex UK index28.127.0464.4101.4
IA Europe Excluding UK sector average37.1024.7962.55115.77
Source: FE Analytics as at 26 March 2021


Top 10 holdings (%)
ASR Nederland3.3
LVMH Moet Hennessy Louis Vuitton3.1
Lundin Energy2.8
Source: Janus Henderson, 28 February 2021


Sector breakdown (%)
Consumer goods23
Health care12.3
Basic materials12
Oil & gas5.8
Consumer services2.6
Source: Janus Henderson, 28 February 2021


Geographic breakdown (%)
Other 6
Source: Janus Henderson, 28 February 2021