‘We look for a trigger to invest . . . but only in firms focused on shareholders’
SEEKING out shareholderfriendly European companies to invest in is not easy. Finding firms which are also determined to increase their dividend payments more times than not is doubly difficult.
But it is a task which Charles Glasse, manager of Waverton European Dividend Growth – with assistance from colleague Chris Garsten – has set himself.
Although the fund, a minuscule £38million in size, remains very much under the radar, Glasse seems to be winning. Not just in terms of finding suitable companies but in going on to produce attractive returns for fund investors.
Over the past five years, the fund has generated overall gains – a combination of capital and income – which are the envy of most rivals. Indeed, only four out of 82 rival European funds have produced better results. A fiveyear return of 104 per cent compares with 74 per cent for the average European fund.
The only slight disappointment is a jerky income growth record which means that on occasion – three times – the fund has cut its annual income payments to investors. Glasse says this is more a reflection of currency movements than companies which have failed to deliver on their income promises. But all the same it undermines the case for the fund’s recent name change from European Income to European Dividend Growth.
‘We are not looking for an attractive yield above all else,’ says Glasse in defence. ‘Unlike some rival European income funds which target higher yields, we would rather seek a lower one and then look to grow both the fund’s income and capital.’
This explains why the yield on the Waverton fund is 3.25 per cent, compared to some competitor funds which yield around 4.5 per cent. Glasse is meticulous about the companies he invests in. He believes many European firms are not focused on creating value for shareholders. He avoids these assiduously.
‘Lots of companies, especially in France, are not run for shareholders,’ he says. ‘They are run for the management or have the Government as a major stakeholder.’
As a result, among the bigger listed companies across Europe, he says his investible universe is only around 175 stocks. He then looks for a ‘trigger’ – for example, a change in management – which will compel him to buy a company’s shares. The last ‘trigger’ he identified was four months ago at French industrial company Eramet.
At the time, he believed a new chief executive, Christel Bories, appointed in May last year would have a transformative impact on the company as she sought to turn around the fortunes of its lossmaking nickel mining operations. She also promised to reinstate the company’s dividends.
Since buying into Eramet, the share price has moved from €62 to above €120. ‘It has gone ballistic,’ says Glasse. He now expects the company to pay a dividend this year – for the first time since 2013. Currently, the fund holds positions in just 38 companies with the biggest stake being in German industrial gas giant Linde, a business which is in the process of merging with North American rival Praxair.
Waverton is based in London’s West End and manages some £5.5 billion. It was previously known as JO Hambro Investment Management and takes its name from the Hambro family home in Gloucestershire.
It is 40 per cent staff owned with the balance controlled by Bermuda-listed financial services company Somers.