The Fund returned -2.7%* in sterling terms in February. The MSCI Europe ex-UK index comparator benchmark returned -3.9% and the average return made by funds in the IA Europe ex-UK sector, also a comparator benchmark, was -4.6%.
European markets held firm for the first half of the month as more evidence of inflationary pressures fed through, but then slid as it became clear that Russia’s aggression towards Ukraine was going to culminate in an invasion rather than any diplomatic solution.
The market reaction to Putin’s announcement of an invasion on 25 February included a sharp rotation towards safe haven assets and defensive areas of the equity market. The implications for supply disruption to energy and other commodities drove a spike in prices: Brent crude oil jumped 11% to finish February at $100 a barrel while the Bloomberg Base Metals Index rose 6% and the Bloomberg Agriculture and Livestock Index gained 8%.
These trends fed through to the portfolio most directly via the share price of German Potash manufacturer K+S (+37%). The potential for supply disruption in the potash market is heightened due to two of the world’s largest producers – Uralkali of Russia and Belaruskali of Belarus – being the subject of economic sanctions imposed by a number of countries.
Basic materials sector peer Boliden (+12%) rose on the commodity price strength and also issued Q4 results which showed higher metals prices feeding through to mining profits growth, which was offset by a drop in smelting division profits due to production disruption and increased maintenance costs.
French pharmaceutical company Ipsen (+17%) saw its shares rise on news that it has entered negotiations around a sale of its Consumer Healthcare business to Myoly Spindler. Investors also welcomed Ipsen’s 2022 outlook for its continuing operations of more than 2% constant-currency sales growth and operating margin of 25% or better.
The healthcare sector was one of the MSCI Europe ex-UK Index’s strongest areas in February as investors sought defensive exposure, rising 0.6%. The utilities sector was the only other gainer in sterling terms, adding 1.4%.
As cyclicals fell, the worst performing sector was financials, down 8.9%. The Fund felt the impact of the sector weakness through heavy falls for Société Générale (-21%) and BNP Paribas (-16%), both of which released results during the month.
AP Moller-Maersk (-11%) was another heavy faller as investors processed the implications on its shipping business of wide-ranging trade sanctions against Russia.
The Fund has no holdings in Russian companies.
While the investment process’s market regime indicators continue to point towards a Recovering Value and Momentum bias to the portfolio, recent market turmoil – in combination with an expensive market valuation indicator and rising corporate aggression – has presented an opportunity to add stocks with inexpensive defensive and quality characteristics. We added Roche and Ipsen during February, funding the new positions with disposals of Simcorp and Subsea 7, which both had weaker cash flow scores.
Positive contributors to performance included:
K+S (+37%), Ipsen (+17%) and Boliden (+12%).
Negative contributors to performance included:
Société Générale (-21%), BNP Paribas (-16%) and AP Moller-Maersk (-11%).
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 European Growth I Inc |
24.0% |
20.1% |
24.6% |
-12.8% |
11.8% |
|
MSCI Europe ex UK |
16.7% |
7.5% |
20.0% |
-9.9% |
15.8% |
|
IA Europe Excluding UK |
15.8% |
10.3% |
20.3% |
-12.2% |
17.3% |
|
Quartile |
1 |
1 |
1 |
3 |
4 |
*Source: Financial Express, as at 28.02.22, total return (net of fees and income reinvested), bid-to-bid, institutional class. Non fund-related return data sourced from Bloomberg.
**Source: Financial Express, as at 31.12.21, total return (net of fees and income reinvested), bid-to-bid, primary class.
Key Risks
