Liontrust GF European Strategic Equity Fund

April 2019 review

The Fund’s A4 share class returned -1.6%* in euro terms in April (A3 share class -1.5%), compared with the 3.8% return from the MSCI Europe Index and 0.7% return from the HFRX Equity Hedge EUR Index.

 

European equities extended their run of gains to four months. The Fund’s net exposure was lifted to c.67% from 42% in March to reflect the uptrend which appeared in our momentum indicators for market direction. This benign development was not just confined to Europe, with a number of markets globally recovering their poise. The increase in the Fund’s net exposure was effected via an increase in the long book.

 

However, in April the Fund’s performance was weighed down by the short book. While the long book positively contributed to overall Fund performance, it lagged the rise in the MSCI Europe providing a small headwind to relative performance.

 

The market’s ongoing march higher continued to stem from the US Federal Reserve’s switch to a more dovish rhetoric and ongoing trade negotiations between China and the US. The market was also enthused by strong economic data from the world’s two largest economies.

 

The US posted another month of robust jobs growth with a non-farm payrolls figure of 196,000 in March, rebounding strongly from the 33,000 job additions seen in the previous month and outstripping the consensus estimate of 180,000. Importantly for stocks, wage pressure seemed relatively muted which made it unlikely that the Fed would turn its eye back to rate increases.

 

China meanwhile maintained its pace of GDP growth in the first quarter of 2019, with a print of 6.4%. This was despite the trade tensions with the US and above the market’s estimate of 6.3%. Similarly in the US, GDP growth of 3.2% came in considerably ahead of the 2.3% Wall Street forecast. However, this figure was flattered by a build-up in inventories, which could reverse next quarter.  

 

European equities’ advance in April was this time led by cyclical sectors, a reversal of the trend seen in March. In euro terms, IT (+9.0%) was the best performing sector followed by financials (+7.9%) and industrials (+7.8%). The worst performing sectors were health care (-2.1%), real estate (-1.0%) and utilities (-0.2%).

 

Within the long book, shares in iron ore pellet company Ferrexpo (-15.9%) fell sharply after it announced that Deloitte resigned as its auditor following potential links between Ferrexpo’s CEO and a Ukrainian charity under investigation for misuse of funds. Ferrexpo released a statement reassuring on its corporate governance procedures and noted that an independent review on the issue is ongoing.

 

There was more positive news from marketing research company Ipsos (+15.8%), which announced that revenue in the first quarter of 2019 rose 15%, with organic growth up 2.4%. Organic growth was mainly driven by a strong performance in its Asia-Pacific region. The company maintained its full year forecasts of between 2%-4% growth in organic growth.

 

Siltronic (+11.1%) rebounded strongly from a mid-month statement. The silicon wafer maker said that a general slowdown in the semiconductor industry has meant it has seen a muted start to 2019. Sales in the first quarter declined by 8.7%, whilst higher energy costs meant total costs of sales notched marginally higher as well. The company stated that the second quarter is expected to be significantly weaker than Q1. Over the course of 2019, sales are forecast to be 5%-10% below 2018, given the tough environment. Despite an initial sell-off following the statement, Siltronics shares bounced back to end higher on the month.

 

Oil refining company Neste (-6.0%) also released first quarter results, which showed operating profit slowing to €378m from €401m. A decline was already built into consensus expectations given last year’s €140m impact from the US Blender’s Tax Credit 2017, but the fall was greater than the average market forecast. The company’s Oil Products division suffered from tough market conditions, resulting in a 26% decrease in operating profit. In contrast, the Renewable Products segment produced its best ever quarterly operating profit of €337m.

 

The short book suffered notable setbacks in performance. An Austrian tech company saw its shares rise after its customer Apple settled a dispute with Qualcomm, which could see iPhone sales pick up. An online food-delivery company was also a detractor after it raised its revenue forecast for 2019 following a better than expected performance in the first quarter where revenue almost doubled.  

 

Performance since launch* (%)

Liontrust GF European Strategic Equity Performance April 2019

 

Discrete monthly returns (A4 share class)*

1yr since 25/04/14
Fund 1.1% 26.6%
MSCI Europe 4.6% 33.7%
2019
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 7.6% 1.3% 3.0% -1.6%
MSCI Europe 6.2% 4.2% 2.0% 3.8%
2018
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 0.7% 1.1% -1.7% 1.5% 1.2% -2.6% 2.0% -2.0% 1.8% -4.2% -6.3% 1.5%
MSCI Europe 1.6% -3.9% -2.0% 4.6% 0.1% -0.7% 3.1% -2.3% 0.5% -5.3% -0.9% -5.5%
2017
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 1.5% 2.0% 0.5% 1.4% -2.1% -2.0% -0.2% 1.6% 0.8% 1.1% -3.3% 3.0%
MSCI Europe -0.4% 2.9% 3.3% 1.7% 1.5% -2.5% -0.4% -0.8% 3.9% 2.0% -2.1% 0.8%
2016
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund -0.6% -0.2% -0.8% -0.7% 0.9% 2.3% 1.1% -1.5% 2.7% 2.7% -2.2% 1.2%
MSCI Europe -6.2% -2.2% 1.3% 1.9% 2.3% -4.3% 3.5% 0.7% 0.0% -0.8% 1.1% 5.8%
2015
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 1.7% 2.4% 1.5% -1.6% 1.3% -1.3% 3.9% -1.6% 2.2% -3.4% 0.8% 0.2%
MSCI Europe 7.2% 6.9% 1.7% 0.0% 1.4% -4.6% 4.0% -8.4% -4.3% 8.3% 2.7% -5.3%
2014 (subsequent to April's change to fund name and objective)
May Jun Jul Aug Sep Oct Nov Dec
Fund 0.2% 0.0% 1.2% -0.2% -0.5% 1.9% 2.4% 0.9%
MSCI Europe 2.5% -0.4% -1.5% 2.0% 0.4% -1.8% 3.2% -1.4%

 

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

 

 

Mar-19

Mar-18

Mar-17

Mar-16

Liontrust GF European Strategic Equity A4 Acc EUR

4.2

0.3

10.7

-1.1

 

Discrete data is not available for five full 12 month periods due to the launch date of the portfolio.

 

*Source: Financial Express, as at 30.04.2019, total return (income reinvested and net of fees). Non fund-related return data sourced from Bloomberg.

 

**Source: Financial Express, as at 31.03.2019, total return (income reinvested and net of fees).


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.

Tuesday, May 14, 2019, 1:29 PM