Group’s newly titled Global Innovation vehicle will give Stuart O’Gorman and Ian Warmerdam scope to invest across broader range of companies
In March, Henderson announced changes to the Henderson Technology fund, previously known as New Star Technology.
On 10 May, the portfolio was renamed Henderson Global Innovation and given a broader investment remit.
Managers Stuart O’Gorman and Ian Warmerdam will now be able to invest in a wider range of companies including healthcare, environmental and clean energy stocks.
The two managers have worked together running the New Star Technology fund since April 2009, with O’Gorman as Warmerdam’s deputy.
Launched in February 1982, the £221m vehicle, which sits in the IMA Technology and Telecommunication sector, is up 60.7% over five years to 10 May, according to Morningstar. On a three-year and one-year view, the fund is up 28.2% and 37.9%.
The fund will soon no longer be listed in the shrinking IMA Technology and Telecommunications sector and will instead sit in the much larger Global Growth sector.
It will become a more concentrated high conviction portfolio, holding between 40 and 60 names.
Since acquiring New Star’s fund range, Henderson has undertaken a process of consolidation and fund changes in order to avoid duplication across its range.
The changes to Henderson Global Innovation will help to differentiate it from Henderson Global Technology, a long-standing technology fund run by the same management team, which is unaffected by the changes.
For existing investors in Henderson Technology, the changes represent a departure from a ‘pure’ technology fund. However, the broader remit will allow the managers more freedom to pursue their best ideas without being measured against the MSCI World IT benchmark.
They will also have input from Henderson’s sustainable and responsible investment (SRI) team.
Warmerdam explains: “At the outset, approximately 20% of the fund will be run by members of our SRI team.
“They have expertise in both health investing and environmental technology and a proven track record in these areas, which is outside our core expertise in the technology team.”
Warmerdam says while the investment policy and fund name has changed, the stock selection process will be the same.
“It has a significantly broader remit. A significant amount of the stocks will be technology-oriented, but we have the ability to diversify away from technology,” he says.
“Certainly, if we were to ever go through an occasion again where technology as an asset class was to become overheated, this fund’s model would allow us greater flexibility to diversify into other areas.”
Prior to Henderson assuming control of New Star Technology, it had gone through a number of managers in a short period of time. Warmerdam believes this had a detrimental effect on the fund’s performance.
He says: “At Henderson, we have had a lot of years of consistent outperformance. When we took it over, we pulled it into our conviction technology process and managed it in an identical fashion to the Global Technology fund we run in the US, which has worked very well for us.”
This has contributed to the particularly strong performance of the fund over the past 12 months. Technology as an asset class has also done well over the last year.
“We expect this to continue and this fund should be a beneficiary of this,” Warmerdam says.
“We have an approach both in the new fund and in the last model that focuses on various niches in technology, which we believe have the greatest tailwinds.”
The manager says Henderson Global Innovation will focus exclusively on the various areas of technology which offer favourable long-term opportunities.
“At the same time we are offering diversification outside core technology by investing in other attractive areas of the market such as healthcare technology and environmental technology,” he says.
According to Warmerdam, Bill McQuaker, Henderson’s head of equities, has described the vehicle as a 21st century technology fund, because it looks for the most attractive, innovative areas of growth, irrespective of industry definition.
“It allows us and the technology team to apply our skills to a broader part of the market. We do not think the skill set we have is restricted to just technology,” Warmerdam says.
“We think we will prove ourselves to be very good growth investors, and this vehicle allows us to have that broader remit to look outside.
“Our aim is to identify the most attractive and under-appreciated growth areas of the market, certainly those with any kind of innovation bent.”
He highlights e-commerce as one area on which the managers will focus.
“There is a great statistic that backs up our enthusiasm, namely in the US where, despite the enormous success of companies such as Amazon and eBay, online retail still only accounts for 4% of overall retail.
“We think there is an enormous secular change happening here, which will give a tailwind to many firms in the e-commerce space for many years to come.”
Online advertising is another area of focus for the fund.
Warmerdam explains: “We are spending up to 40% of our media time online versus watching the television or listening to the radio.
“But even in the US, which is one of the more mature internet markets, advertisers spend less than 10% of their advertising money on online. We think this is a gap that will close.”
He points out there has been considerable growth of internet data traffic driven by increased connectivity with products such as the iPhone delivering video and music.
“We think this trend will continue. We aim to invest in those companies offering the infrastructure or equipment to allow this growth to continue,” he says.
“We have seen data growth driven by electronic offices, increased regulation processing, and paperless offices.
“There has been exponential growth in the amount of data that needs storing, particularly in enterprises. Again, we aim to invest in those companies best positioned to serve this market.”
Environmental technology is another niche area the managers aim to exploit.
“This will be driven by environmental concerns, and concerns of energy independence will be driven by the increased cost of carbon fuels and the decreasing cost of cleaner forms of energy,” Warmerdam says.
“This is going to be a driver for decades to come, both for those companies able to offer clean energy and also those offering greater energy efficiency.”
Within healthcare technology, Warmerdam says the fund will be placed to play the theme of ageing populations as well as increased spending in developing markets, which will drive up healthcare spending beyond GDP growth.
