Liontrust European Growth Fund

September 2018 review

The Fund returned -0.4%* in sterling terms in September, compared with the -0.5% return from the MSCI Europe ex-UK index.

 

Persistent concerns about trade wars and emerging markets meant that European equities started off on the back foot in September. Donald Trump continued to threaten China with tariffs of up to 25% on around US$200bn of Chinese imports, while China stood ready to retaliate. As has been the trend recently, this rhetoric was followed by action later in the month, though the US tariffs implemented on Chinese goods was only 10%. China’s reaction was to slap tariffs of between 5-10%on US$60bn of US imports.

 

Meanwhile, the further tightening of global monetary policy resulted in the ongoing weakness in emerging market currencies, as the dollar ploughed higher. The Turkish lira found some welcome relief, however, as its central bank hiked its one week repo rate to 24% from 17.75%, which was greater than the market’s expectations. There was also another round of monetary tightening by the US Federal Reserve, which raised rates once again in September to a range of 2.00% to 2.25%. The US central bank remains on course to raise rates again in December and signalled three more hikes in 2019.

 

There was a bounce back in European stocks in the second half of the month, driven mainly by the energy and finance sectors, though it was not enough to push the MSCI Europe ex-UK Index into positive territory. Energy (+4.0%) was the stand out sector in the MSCI Europe ex-UK Index in sterling terms, as oil prices rose to four year highs. This came after Saudi Arabia and other major oil producing nations decided against raising crude production. Lundin Petroleum (+9.7%) and Subsea 7 (+8.1%) were among the Fund’s oil exposed stocks to benefit from the rise.

 

The financial sector (+1.9%) was the only other sector to end higher. Real estate (-4.2%), IT (-3.5%) and consumer staples (-2.2%) were the biggest fallers. However, the Fund’s principal contributor to performance sits in the consumer discretionary space: Technogym (+22.6%). The fitness services and equipment manufacturer’s share price rose sharply in the run up to its half year results. The numbers themselves were largely in line with the market’s expectations, with profit for the first half of 2018 doubling year-on-year to €37.7m from revenue of €273m. The results were particularly pleasing given the implementation of a new IT system which caused a disruption to revenues in May and June. Nerio Alessandri, the group’s chairman and chief executive, stated that these were recovered after the end of the period, in July and August.

 

Elsewhere, there was little individual stock-specific news for the portfolio. French mining and metallurgical group ERAMET (+23.0%) benefitted from a broker upgrade and a general bounce in the basic resources sector on relief that tariffs imposed by the US and China were lower than expected. However, the ongoing trade dispute between the two superpowers weighed on returns in the IT sector, which was responsible for the biggest detractors from the Fund’s performance – Siltronic (-15.9%), SimCorp (-8.9%) and Software AG (-8.1%).

 

Positive contributors to performance included:

ERAMET (+23.0%), Technogym (+22.6%) and Lundin Petroleum (+9.7%).

 

Negative contributors to performance included:

Siltronic (-15.9%), SimCorp (-8.9%) and Software AG (-8.1%).

 

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

 

 

Sep-18

Sep-17

Sep-16

Sep-15

Sep-14

Liontrust European Growth I Inc

6.8

16.7

30.0

4.3

6.3

MSCI Europe ex UK

1.3

21.4

20.0

-1.6

5.6

IA Europe Excluding UK

1.9

21.9

18.4

3.6

4.0

Quartile

1

4

1

2

1

 

*Source: Financial Express, as at 30.09.2018, total return (net of fees and income reinvested), bid-to-bid, institutional class.

 

**Source: Financial Express, as at 30.09.2018, 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, October 22, 2018, 5:20 PM