Liontrust European Growth Fund

June 2019 review

The Fund returned 6.7%* in sterling terms in June, compared with the 6.3% return from the MSCI Europe ex-UK index.

 

Central bankers provided impetus for markets to bounce back from their wobble in May. The US Federal Reserve gave its strongest hint yet that it is ready to loosen its monetary policy. The bank dropped the word “patient” from its June policy statement, while noting that uncertainties have increased with regards to the outlook for inflation and economic growth. The Federal Open Market Committee will “act as appropriate to sustain the expansion”. According to futures markets, a rate cut in the next meeting in July is certain.

 

The Fed’s statement came after European Central Bank (ECB) President Mario Draghi indicated the possibility of extra monetary support for the eurozone. In a speech on 20 years of ECB monetary policy, Draghi highlighted that risks to the economic outlook remained tilted to the downside and if there isn’t an improvement then additional stimulus would be required. His speech sparked a rally in eurozone debt with the yield on German 10-year Bunds reaching a new record low.

 

Away from central banks, an escalation in geopolitical tensions saw a surge in oil prices in the second half of June. Iran was blamed for an attack on two oil tankers in the Gulf of Oman and the downing of a US reconnaissance drone. Trump said US aircrafts were en route to strike back against Iran, but he called off the attack at the last minute. The fears that this conflict could continue and potentially disrupt oil supply lines saw the price of Brent rise 11% in the second half of June. This supported shares in Swedish energy company Tethys Oil (+22.1%) and oil and gas exploration company Lundin Petroleum (+13.1%). The price of gold, a traditional safe haven, meanwhile reached its highest price in over five years.

 

Most sectors in the MSCI Europe ex-UK Index made gains in sterling terms. The best performer was consumer discretionary (+10.4%) followed by industrials (+8.5%) and materials (+8.4%). Real estate was the only sector to end in the red, falling 6.9%. 

 

There were a number of stocks in the Fund which participated in the rise in European equities, with some companies such as CIE Automotive (+19.0%), Atlas Copco (+17.9%) and Moncler (+15.3%) all making double digit returns without releasing any corporate newsflow.

 

French aircraft manufacturer Dassault Aviation (+14.5%) also did not release any significant corporate news, but its share price rose following a broker upgrade. The stock had fallen around 25% from its 2019 peak and analysts believe that the company is now cheaply rated and has the flexibility to significantly increase its dividend payment.

 

Swedish Match (-7.2%) was one of the few holdings to register a negative return in June. The company’s shares declined after US tobacco giant Altria bought a controlling interest in the Burger Sohne companies which commercialise oral tobacco-derived nicotine brand on!. Concerns about the extra competition for Swedish Match depressed investor sentiment towards the snus, moist snuff, and chewing tobacco group.

 

Positive contributors to performance included:

Tethys Oil (+22.1%), CIE Automotive (+19.0%) and Atlas Copco (+17.9%).

 

Negative contributors to performance included:

Swedish Match (-7.2%), Deutsche Pfandbriefbank (-5.3%) and Technogym (-3.5%).

Discrete years' performance** (%), to previous quarter-end:

 

Jun-19

Jun-18

Jun-17

Jun-16

Jun-15

Liontrust European Growth I Inc

-1.7

5.0

29.3

18.9

-1.4

MSCI Europe ex UK

7.3

1.8

28.0

4.9

0.7

IA Europe Excluding UK

3.3

3.1

29.2

4.5

4.1

Quartile

4

2

2

1

4

 

*Source: Financial Express, as at 30.06.2019, 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 03.07.2019, total return (net of fees and income reinvested), bid-to-bid, primary class.


For a comprehensive list of common financial words and terms, see our glossary here.

 

Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. 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. The Liontrust European Growth Fund holds 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. The Liontrust Global Income Fund's expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation. 

Disclaimer

The information and opinions provided 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. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Wednesday, July 24, 2019, 2:35 PM