VIDEO: Absolute returns for uncertain times
The US Federal Reserve has done its job, as has the bank of Japan. Finally, it is the turn of the European Central Bank (ECB) to finish the job.
We now have to hope that this final intervention from the ECB would help the world move beyond its painfully slow recovery. What else is left in terms of potential stimulus? That is one of the biggest worries that investors face today.
Given this backdrop, investors are increasingly looking to identify managers who can achieve steady capital appreciation, with minimum drawdowns and reduced volatility. To achieve this, managers need to combine strong stock-picking skills and active management of portfolio net and gross exposures.
On the stock-picking side, Leopold Arminjon, the lead manager of the Henderson Horizon Pan European Alpha Fund, sees potential in big oil stocks, where he is overweight. He feels that these companies are finally paying attention to cash-flow generation, having already brought capital expenditure under control. They are also increasingly bringing operational expenditure under control.
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As a consequence, these companies are more comfortable covering their dividends. The big oil sector's dividend yield is attractive at between 4.5% and 5.5%. Dividend yield is currently one of Arminjon’s favourite themes within the European stock market.
With regards to managing the fund’s exposure, gross exposure is currently around 75% – exceptionally low. This reflects the fact that below the quiet, low-volatility surface of the market, there are strong currents with huge sector rotations in action. In these uncertain times, Arminjon’s focus is to protect capital, hence the low gross exposure.
The Henderson Horizon Pan European Alpha Fund aims to achieve an absolute return through steady capital appreciation, with a low level of volatility. The fund typically constitutes a 50-70 mix of highly liquid European stocks, with a gross exposure between 120% and 140%, and a typical net exposure of 20% to 40%.