Incoming Henderson Global Trust manager Wouter Volckaert (pictured) is planning to slash the trust's UK exposure, as he argues he can find better opportunities elsewhere.
Although the £161 million trust switched from a composite to the MSCI All Country World Index last June, it still has approximately a 13% overweight to UK equities.
‘Ultimately I want to invest where the best opportunities are, so my sector allocations do not get out of hand,’ Volckaert said.
‘I expect the role of the UK to come down over the next year, so the UK and the pound are less of a driver. The elections are coming up, so it would be good to lower it before then.’
Volckaert officially took over the portfolio on February 1. He joined Henderson in September from Morgan Stanley as part of succession planning for Brian O’Neill who has retired from the trust, although he remains part of the global equity team.
Elsewhere, large caps will also have less of a place in the new portfolio than they did under O'Neill's leadership, when 80% of the portfolio was made up of companies with a capitalisation of more than £20 billion.
While large caps are trading on compelling valuations, Volkaert said he was not convinced their performance would turn around in the short term, as companies still needed to see the benefits of a strong flow in equities.
‘I’m still finding very good opportunities in the mid-cap space so I would like to diversify and add a bit of mid-cap exposure,’ he said
The fund, which consists of 78 stocks, is set to become more concentrated, with plans to reduce down to 60.
The manager has bought five new stocks since the transition, and said he expects 30% turnover in the portfolio by the time of the trust’s AGM in May.
While Volckaert said he shares O’Neill’s conservative approach, he has discussed using ‘strategic’ gearing of up to 10% with the board, although he thinks this is not the right time in the market cycle to use this facility.
The trust is currently trading on a 10.3% discount to net asset value (NAV) at 346 pence. Over the past 12 months the trust has posted a 2.3% share price loss and a 4.28% NAV return. This compares to a 9.27% rise by the FTSE World index.
Over the past three years the trust has posted an 8% share price return and a 15.1% NAV return versus a 23.9% rise by the FTSE World index.