Fund Performance review
The fund underperformed its benchmark, the MSCI All Country World Index, returning 4.7% versus 6.5% over the final quarter of 2016.
Equity markets generally enjoyed a strong run in the final quarter of 2016, with more economically sensitive sectors such as financials and energy seeing strong gains. In this backdrop, the fund lagged the wider rally, which should not be surprising given our preference for owning less-cyclical, well-capitalised, long-enduring franchises. Our stock selection within the healthcare and technology sectors offset this to some extent, aiding our relative performance over the period.
At the stock level, US-based Cognex was among the best performers. This is one of the global leaders in machine vision technology. Machine vision systems are used on production lines to guide manufacturing equipment, identify items and inspect quality, resulting in improved throughput. We continue to like the company’s positioning in the industry, with a large IP portfolio and research and development budget providing a sustainable competitive advantage and a very strong balance sheet, protecting the company should they encounter a leaner spell of orders.
Other notable positive contributors included Cognizant, the provider of consulting and outsourced information technology (IT) services. The share price rebounded from the sharp overreaction to the company’s late September announcement of an internal investigation into improper payments associated with permits for certain company-owned facilities in India. While any incident of impropriety in our holdings is obviously concerning, we were reassured by the management team’s self-disclosure and swift course of action to remedy the issue, with any potential liabilities likely to be immaterial. The company also reported a solid set of operating results during the period, with earnings surpassing expectations, which reinforces our confidence in the long-term prospects of the business.
The largest detractor from performance was Activision Blizzard, the entertainment software developer. Despite continued strong operating results there are wider concerns that one of its flagship titles, Call of Duty, may be losing some of its lustre. Our belief is that the company is well placed to benefit from the shift to digital distribution, affording a more profitable route to market for their impressive stable of content.
* Source: Morningstar, at 31 December 2016, nav-nav, net income reinvested, net of fees, Class A Acc shares, in Sterling. Past performance is not a guide to future performance. Prices can go up and down and you may not get back the amount originally invested. NAV = net asset value.
Fund activity review
|Discrete year performance
||Henderson Global Growth Fund (%)
||MSCI AC World Index (%)
|1 year to 31/12/2016
|1 year to 31/12/2015
|1 year to 31/12/2014
|1 year to 31/12/2013
|1 year to 31/12/2012
During the quarter we initiated a holding in Mercado Libre, the leading e-commerce company in Latin America. The company operates the largest online marketplace in the region as well as offering payment services and advertising. We believe that the business is well positioned to benefit from the longer term growth opportunity in Latin American e-commerce and that the valuation is attractive following a recent pullback in the stock. We also further increased our holding in American Express as our conviction has grown that the strength of the franchise is not yet fairly reflected in the company’s valuation. We exited our position in Willis Towers Watson in light of reduced conviction on the longer term prospects for its business.
Fund manager's outlook
Many investors will be drawn into attempts to predict the short-term course of the market. We do not try to predict political events, nor do we attempt to second guess the market’s reaction when the unexpected unfolds. While we don’t wish to be naive about the implications, we believe there are much more predictable trends to be studied in the quieter domain of the long-term investor, for example the penetration rate of e-commerce or the adoption of active safety systems in vehicles. We remain entirely focused on uncovering undervalued securities that are exposed to strong secular tailwinds of growth. By sticking to this strategy, we aim to continue generating significant absolute and relative returns over the longer term.
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Past performance is not a guide to future performance. 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. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.
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Issued in the UK by Henderson Global Investors. Henderson Global Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), Henderson Fund Management Limited (reg. no. 2607112), Henderson Investment Funds Limited (reg. no. 2678531), Henderson Investment Management Limited (reg. no. 1795354), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), Gartmore Investment Limited (reg. no. 1508030), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. Telephone calls may be recorded and monitored. Ref: 34U
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