Liontrust European Growth Fund

October 2019 review

The Fund returned -1.5%* in sterling terms in October, compared with the -1.6% return from the MSCI Europe ex-UK index and the -1.3% average return made by funds in the IA Europe ex UK sector.

 

Equity markets began the month on unstable footing as traders reacted to poor US private sector payrolls data and further weakening in global manufacturing indicators. This added to ongoing trade war and Brexit uncertainties and resulted in a global stockmarket slump.

 

During the rest of October, stocks gradually clawed back some losses. There were some tentative signs of progress in the US and China trade talks, with US trade representatives stating they are close to finalising some sections of the “phase one” deal. There have been many false dawns when it comes to thawing trade relations between the two superpowers so investors were limited in their enthusiasm.

 

Brexit developments also caught the market’s attention. PM Johnson struck a deal with the EU and although he failed to get it ratified by parliament and meet the 31 October deadline, he was successful in securing a December general election. The pound rose as traders assessed that risks of a no deal Brexit receded, which in turn weighed on the MSCI Europe’s returns in sterling terms.

 

Brexit and trade news fed into the US Federal Reserve’s decision to signal no further immediate monetary easing measures following a third interest rate cut in its October meeting. Chair Jerome Powell said that chances of a no deal Brexit have materially declined and the potential of phase one agreement with China has meant that the principal risks to global growth have subdued.

 

Real Estate (+3.4%) was by far the best performer in sterling terms in the MSCI Europe ex-UK Index. Industrials (+0.8%) and consumer discretionary (+0.7%) were the only other sectors to end higher in October. Consumer staples (-6.6%), utilities (-4.1%) and communication services (-4.0%) were the worst performers.

 

Telenor (-9.5%) was a Fund holding in the communication services sector, which recorded a share price loss. The Norwegian telecoms company issued third quarter results which were largely in line with market expectations but highlighted difficult trading conditions in Pakistan, partly resulting from the re-introduction a local telecom tax. This meant that currency adjusted gross profit (excluding new acquisition DNA) declined by NKr800m.

 

There were more positive takeaways from Atlas Copco’s (+9.9%) third quarter statement. The Swedish industrial tools and equipment manufacturer said orders increased 16% and revenue rose 13% both coming in ahead of market expectations. The results were particularly strong when measured against the tough global backdrop in the manufacturing industry. However, the group noted that demand is expected to be somewhat lower in the near-term. 

 

Also defying a weak backdrop was AP Moller-Maersk (+7.0%), the Danish shopping container carrier, which raised 2019 profit guidance. Earnings before interest, taxes, depreciation and amortisation is now expected to be in a range of US$5.4bn-US$5.8bn, compared to previous guidance of US$5.0bn. This resulted from lower fuel prices and higher profitability in its port terminals business. In May, the company had warned about the impact of the trade war on global container volumes.

 

Mining and metals company Boliden (+11.1%) said its third quarter numbers were hit by major maintenance shutdowns in its copper smelters, a breakdown in the nickel line in Harjavalta and logistics disruptions between mines and smelting plants. Despite this, the company’s results came in ahead of consensus estimates, with operating profit growing to Skr1.87bn compared to the market estimate of Skr1.73bn.

 

Positive contributors to performance included:

Boliden (+11.1%), Atlas Copco (+9.9%) and Deutsche Pfandbriefbank (+6.3%).

 

Negative contributors to performance included:

Subsea 7 (-14.1%), Gaztransport et Technigaz (-12.7%) and Telenor (-9.5%).

 

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

 

 

Sep-19

Sep-18

Sep-17

Sep-16

Sep-15

Liontrust European Growth I Inc

-3.0

6.8

16.7

30.0

4.3

MSCI Europe ex UK

5.8

1.3

21.4

20.0

-1.6

IA Europe Excluding UK

2.2

1.9

21.9

18.4

3.6

Quartile

4

1

4

1

2

 

*Source: Financial Express, as at 31.10.2019, 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 30.09.2019, 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.

Monday, November 18, 2019, 9:55 AM