Why this portfolio manager is looking to Europe for better risk-adjusted returns

Like most investors, money manager Katherine Owen may not have been prepared for the recent market meltdown brought on by U.S. President Donald Trump’s tariff war, but she says her team’s portfolios are built to withstand this type of volatility.

“Our style and how we think about risk management is to hedge against different scenarios we think might play out,” says Ms. Owen, a portfolio manager at Mackenzie Investments in Toronto, who helps oversee about $22-billion in assets with the firm’s global equity and income team, including the $7-billion Mackenzie Global Dividend Fund, led by Darren McKiernan.

In recent months, her team has been buying more defensive stocks in industries such as health care and consumer staples. It has also added companies in sectors the fund has never owned, such as utilities and telecommunications. Examples include buying AT&T Inc. T-N at the end of last year and Duke Energy Corp. DUK-N at the start of 2024.

“Given the current environment and valuations and the risk-adjusted opportunity, we’ve weaved in more in these areas,” she says.

Mackenzie Global Dividend Fund is about 60 per cent in U.S.-listed companies, 20 per cent in Europe and the U.K., and the rest in Asia and other parts of the world, including 3 per cent in Canada. The U.S. weighting is quite lower than the benchmark MSCI World Index, at 72 per cent.

“We’re not making a macro call,” Ms. Owen says. “It’s more of a function of where we’re seeing opportunities. We’re seeing better risk-adjusted returns in Europe versus the U.S.”

The fund has returned 16.4 per cent over the past 12 months and has a three-year annualized return of 12 per cent and a five-year annualized return of 14.9 per cent. The performance is based on total returns in Canadian dollars, net of fees, as of March 31.

The Globe spoke with Ms. Owen recently about what she’s been buying and selling:

Name three stocks you own today and why.

Deutsche Börse AG is a stock we’ve owned on Germany’s Frankfurt Stock Exchange since we launched the fund 11 years ago. It has consistently been a top holding, and we continue to buy it with new money. We like it because of its strong leadership position in European financial markets.

It’s a diversified financial services company that operates stock exchanges in Europe and is the region’s largest auction platform and a trade settlement hub. It’s like a toll road: every time a transaction occurs, Deutsche Börse collects a fee.

It generates a lot of cash flow and has operating margins of more than 50 per cent – among the highest of all the companies we own in the fund. It’s also a business that does well in both up and down markets, and it pays a dividend that yields about 2 per cent.

Itochu Corp. ITOCY, a Japanese general trading company, is a stock we bought on the Tokyo Stock Exchange a couple of years ago and continue to buy with new money. It’s one of Japan’s most global companies. It’s involved in importing and exporting everyday essentials such as textiles, machinery, metals and energy to more than 60 countries.

The company is vertically integrated and has a lot of synergies between all of the businesses it operates. It’s also a well-respected company in Japan that attracts top talent in the country.

Warren Buffett has become a major investor in recent years and owns about 10 per cent of the company. Itochu also has an attractive valuation and pays a 3-per-cent dividend yield that should be sustainable. Itochu, like many other global businesses, is exposed to tariffs. However, only about 6.5 per cent of its revenues are exposed to the U.S, and we expect continued limited impact on the fundamental business itself.

AbbVie Inc. ABBV-N, the U.S. pharmaceutical giant, is a stock we bought on the New York Stock Exchange in November, 2020. It’s a top holding, and we continue to add to it as we get additional fund inflows to maintain position size.

AbbVie isn’t a hugely recognizable name, but its products are. The company created Humira, a prescription medication for rheumatoid arthritis, one of the best-selling drugs ever. It also bought Allergan about five years ago, which makes Botox, another popular drug.

When we bought AbbVie five years ago, it had a very low valuation because Humira was going off-patent and facing increased competition, but we saw potential for some of its up-and-coming drugs, such as Skyrizi and Rinvoq [medications used to treat inflammatory bowel disease].

AbbVie became a top holding in the fund and has doubled over the past five years, all while generating an attractive dividend that currently yields about 3.5 per cent. The stock has done well and we believe the outlook is still attractive. The stock isn’t as cheap, but we’re still comfortable owning it as one of our top 10 holdings.

Name a stock you sold recently.

Pernod Ricard SA PRNDY, the France-based spirits company behind brands such as Chivas Regal and Jameson Irish Whiskey, is a stock we had been trimming last year and finally exited this past fall. We owned it for about a decade on the Euronext Paris exchange.

The barriers to entry for this and similar big consumer brands are much lower today, thanks to the internet and social media. It’s much easier for competitors to gain market traction and brand recognition. The rise of weight loss drugs may be leading people to drink less alcohol. We own spirits company Diageo PLC DEO-N, which owns Crown Royal, Johnnie Walker and Guinness, on the London Stock Exchange because we think it’s a better business.

This interview has been edited and condensed.