Henderson EuroTrust (HNE ) has said frustration over its persistent share price discount was a factor in the decision announced last week to merge with stablemate Henderson European Focus Trust (HEFT ). 

Chair Nicola Ralston said the merger to make a £750m Henderson European Trust would not only marry ‘excellent’ long-term performance and highly regarded portfolio managers, but the enlarged fund would have lower fees and wider resources at no extra cost for shareholders. That could be enough to rerate shares that have traded below asset value since 2017.

Ralston said she would stay on as chair until the merger completed in July, or until the annual general meeting that will formalise its liquidation.

Half-year results showed the trust delivered underlying returns including dividends of 4.5%, beating its FTSE World Europe ex-UK index benchmark’s and AIC sector average of 4.2%. The shares returned 4.3% as their discount to net asset value widened slightly from 13.5% to 13.9%.

Fund manager Jamie Ross said the merger was in the best interests of shareholders and that he was ‘very excited’ at the prospect of working with HEFT co-manager Tom O’Hara on Henderson European Trust.

He pointed to improved sentiment at the prospect of interest rates behind the equity rally over the period.

The most significant driver of performance was exposure to obesity, through positions in Danish businesses, Novo Nordisk and Zealand Pharma. German company Beiersdorf, which owns the skincare brand Nivea, was another strong performer.

French wine and spirits company Pernod Ricard was one of the largest detractors as demand from the North American and Chinese markets slowed. Ross held onto the position in hope fo strong revenues from China and India longer term.

Swiss aseptic-packaging company, SIG, which has been in the portfolio in 2018, suffered as investors became concerned over its increased leverage while its food and beverage end markets slowed down.

New holdings include Finnish lift company Kone, which tends to have sticky customers, and semiconductor manufacturer Infineon which is exposed to auto and industrial markets and is benefitting from the shift to digitalisation in industrial end markets and to electrification in auto markets.

Over five years, EuroTrust has generated a 61% total shareholder return gained 61% against European Focus’ 76%, with both beating the benchmark’s 55% gain, according to Morningstar.