The Fund’s A4 share class returned 5.5%* in euro terms in January. The Fund’s comparator benchmarks, the MSCI Europe Index and HFRX Equity Hedge EUR Index, returned -3.2% and -2.2% respectively.
In early January, minutes from the US Federal Reserve’s December meeting served notice of its intention to raise rates sooner and faster than had been expected and to scale back its balance sheet. After data showed that US consumer price inflation rose to 7%, Fed Chair Jay Powell later confirmed that the Fed would plan to raise rates in March and finish quantitative easing in the same month. Vitally, he also indicated – or refused to rule out – the possibility of raising rates at every policy meeting in 2022 or raising rates by increments greater than 25 basis points.
While bond yields rose, the effect of higher rate expectations on equity markets was to further catalyse the rotation from growth to value. Last month we commented that the short book’s good performance was the result of the market beginning to shun the expensive hyper-growth stocks with negative cash flow that we are shorting in the current environment. This trend saw a big acceleration in January. The MSCI Europe Value Index outperformed the MSCI Europe Growth Index by 12 percentage points.
In very simple terms, the Fund’s long book has a heavy value tilt while its short positions target the worst examples of over-ambitious and overvalued growth. This fed through to a very strong performance in January. An outsized positive contribution from the Fund’s short book drove this performance, allowing the Fund to post a positive return despite a 30% net exposure to a falling market. The long book, while losing value, outperformed the drop in the MSCI Europe Index.
One of the short book’s largest contributions came from a UK direct-to-consumer brand marketing platform whose operating model has received a lot of negative attention since listing last year. Other profitable short positions included: a US-listed developer of transfusion diagnostics; a Swedish biotech company caught up in a patent dispute; and a UK consumer reviews platform whose 2021 trading update was better than expected, but which is also contending with the expiry of a shareholder lockup period
Within the long book, Lundin Energy (+15%) and Tethys Oil (+7.2%) offered some participation in an energy sector that was by far the strongest area of the MSCI Europe ex-UK Index, up 14% as the Brent crude oil price rose 17%. Other sources of value strength included potash manufacturer K+S (+10%), electricals and plumbing distributor Rexel (+10%), and mining giants Rio (+6.5%) and BHP (+6.1%). Within the Fund’s financials exposure, Bank of Ireland (+20%), BNP Paribas (+3.7%) and Capital One Financial (+2.6%) all rose.
Discrete years' performance** (%), to previous quarter-end:
Past performance does not predict future returns
|
Dec-21 |
Dec-20 |
Dec-19 |
Dec-18 |
Dec-17 |
Liontrust GF European Strategic Equity |
32.87% |
-9.97% |
23.22% |
-7.12% |
4.17% |
MSCI Europe |
25.13% |
-3.32% |
26.05% |
-10.57% |
10.24% |
HFRX Equity Hedge EUR |
11.03% |
2.91% |
8.55% |
-12.26% |
7.76% |
|
Dec-16 |
Dec-15 |
Liontrust GF European Strategic EquityA4 Acc EUR |
4.85% |
6.09% |
MSCI Europe |
2.58% |
8.22% |
HFRX Equity Hedge EUR |
-1.66% |
-3.09% |
*Source: Financial Express, as at 31.01.22, total return (income reinvested and net of fees).
**Source: Financial Express, as at 31.12.21, total return (income reinvested and net of fees). Discrete data is not available for ten full 12-month periods due to the launch date of the portfolio (25.04.14). Investment decisions should not be based on short-term performance.
Key Features of the Liontrust GF European Strategic Equity Fund
Investment policy summary |
The investment objective of the Fund is to achieve a positive absolute return over the long term for investors through a portfolio of long, synthetic long and synthetic short investments primarily in European equities and equity related derivatives |
Allowable investment types |
Equities. Financial Derivatives. Currency Forwards. Cash, near cash, money market instruments, warrants Government and corporate bonds (for cash management and liquidity purposes). Collective Investment Schemes (including ETFs) up to 10% of the NAV of the Fund. For a full list of the types of investment allowable in the Fund please see the KIID/Prospectus. |
Holding period |
Long-term |
Risk profile (SRRI) |
5 |
Active/passive investment style |
Active |
Benchmark |
Comparator benchmarks: MSCI Europe Index and HFRX Equity Hedge (EUR) Index |
Costs |
1.75% Ongoing Charges Figure (A4 class): 1.5% Annual Management Charge and 0.25% Fixed Admin Fee (as at 31.12.21). A performance fee of 20% is calculated and accrued at each valuation point. Payment is subject to the Fund's net asset value exceeding an Adjusted Prior Net Asset Value which is a High Water Mark adjusted by any new subscriptions or redemptions and a 4% hurdle per calendar year. No Performance Fee will be payable with respect to a Fund class in any Performance Period unless such class has recovered any accumulated underperformance for previous Performance Periods. Any performance fees are only payable on the positive difference between the NAV and the Adjusted Prior Net Asset Value |
Key Risks