View the article online at http://citywire.co.uk/money/article/a732926
Henderson Global snaps up Rentokil shares sold by Woodford
It's all change at Henderson Global as the investment trust's new manager swoops on shares dumped by Invesco Perpetual.
Wouter Volckaert, the new manager of Henderson Global Trust (HGL ), bought into Rentokil Initial (RTO.L) after Invesco Perpetual was forced to sell half its holding in the £2 billion pest control to catering group.
Although not previously reported Rentokil was part of a move which saw Invesco sell a number of smaller stocks to raise cash for investors leaving Neil Woodford's income funds before his departure to Oakley Capital in April to launch Woodford Investment Management.
Volckaert (pictured), hired from Morgan Stanley last year to replace Brian O'Neil, HGL's veteran fund manager, pounced on the shares at a cheap price of 106p. 'Invesco was a forced seller as a result of management change,' he said. 'We see a lot of upside and took the opportunity to build a long-term stake.'
The price suggests Volckaert bought in early November shortly after Invesco cut its stake from 25% to 14%. Despite disappointing some analysts with the length of its restructuring the shares have risen 16% since then compared to a 2% fall in FTSE 100.
Rentokil was the toast of the City back in the Nineties. Former chairman Sir Clive Thompson was nick named 'Mr 20 per Cent' for delivering hefty annual increases in earnings per share. However, when the group lost its way in the new century, Thompson was ousted in 2004 and the company went on to make the damaging acquisition of City Link, the struggling parcels business that it finally sold to Jon Moulton's Better Capital group for £1 last year.
All change for 'dull' trust
Volckaert, the Belgian-born, London Business School educated investor said Rentokil typifies the theme of 'change' he intends to bring to the portfolio. He likes the stock because he believes the changes its new management implemented in recent years have been hidden by the need for high capital expenditure and the recession. As those conditions change 'I see 2015 cashflow 30-50% higher than consensus', he forecast.
Expanding on the theme, Volckaert said markets were only 'semi efficient' and did not immediately recognise changes in companies and industries leading to 'a disconnect between the value of a stock and the price paid, creating investment opportunities.'
However, out of deference to O'Neill, who managed the trust since 1983 and who remains at Henderson looking after institutional clients, Volckaert stressed he shared O'Neill's long-term, focused approach, which will see him hold between 50-80 stocks with the bulk of the fund in the top 30-40 ideas.
Nevertheless, Volckaert has got the job of implementing a new investment approach which will see it measured against the MSCI World index. Previously, its benchmark was a 50:50 split between the FTSE All Share and the MSCI World. Against the MSCI the fund is 13% overweight in the UK, which the manager intends to reduce over time. Volckaert will also increase the proportion held in medium sized or mid cap stocks, which he thinks generally have better prospects than larger companies.
This could please investors who have been looking for change at HGL. Although analysts at Numis estimate long-term annual returns from the portfolio have been 11%, just ahead of the MSCI World, recent shareholder returns have been 'dull', it notes. Investors have not been helped by the discount on the shares widening after the trust transferred to Henderson as part of its acquisition of Gartmore. As the smallest trust in the Global Growth sector, HGL needed to boost performance to attract more investors, Numis said.
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