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Liontrust European Growth Fund

February 2022 review

Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.

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.

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Key Risks 
 
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
 
Investment in Funds managed by the Cashflow Solution team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. Some of the Funds may invest in derivatives. The use of derivatives may create leverage or gearing. A relatively small movement in the value of a derivative's underlying investment may have a larger impact, positive or negative, on the value of a fund than if the underlying investment was held instead. Some of the funds may hold a concentrated portfolio of stocks. If the price of one of these stocks should move significantly, this may have a notable effect on the value of the respective portfolio.

 

Disclaimer
 
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 
 
This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust. Always research your own investments and if you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 

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