Liontrust GF European Strategic Equity Fund

January 2019 review

The Fund’s A4 share class returned 7.6%* in euro terms in January (A3 share class 7.7%), compared with the 6.2% return from the MSCI Europe Index and 3.7% return from the HFRX Equity Hedge EUR Index.

 

Net exposure at month end was c.35%. The positive start to 2019 was a stark contrast to the way 2018 ended for equity markets. The long book was able to fully participate in the rebound and produced a return which was double that of the market. This more than made up for the short book, which detracted slightly from the overall Fund’s performance, having provided strong support during the recent sell off.

 

Markets found some respite after key headwinds eased slightly in January. There was optimism that trade tensions between China and the US could recede as the pair continued talks amid a truce against further tariffs. Protectionist measures between the two superpowers have begun affecting the real economy with economic data from China in particular showing signs of a slowdown. This was mirrored in corporate news too, most notably with Apple warning of slowing iPhone revenue from China.

 

As is often the case in China, the central bank provided extra stimulus to calm investors. The People’s Bank of China announced that it would reduce the reserves that commercial banks are required to hold, which would free up around US$117bn in its banking system.   

 

The Federal Reserve, however, was the main focus for investors as the US central bank softened its rhetoric on its balance sheet normalisation and the pace of interest rate increases. Fed members stated that they will be patient with further adjustments to monetary policy as a result of building global economic and financial pressures and muted inflation. Increasingly tight monetary policy has suppressed the market in recent months and the Fed’s statement lifted this pressure for the time being.

 

The gains in European equities were broad based. The best performing sectors in the MSCI Europe were real estate (+10.7%), consumer discretionary (+9.4%) and materials (+8.7%), while communication services (-0.8%) was the only sector to end lower.

 

The long book’s biggest gainers were in the materials sector: Ferrexpo (+36.7%), Rio Tinto (+15.6%) and Anglo American (+14.5%). Following the tragic disaster at the Vale mine in southern Brazil, the price of iron ore rose due to the expected shock to supply. This in turn lifted share prices of mining companies. 

 

UK-based house builder Persimmon (+26.7%) issued a strong year-end trading update. It saw a 4% increase in group revenue in 2018 in a UK housing market which was supported by healthy employment levels and low interest rates. The company anticipates profit before tax for 2018 to be ahead of current market expectations. Persimmon’s forward sales at year end were 3% higher than the same time in 2017, putting it in good stead for 2019.

 

WH Smith (+19.4%) shares rose on the back of its Christmas trading statement. In the 20 weeks to 19 January, total sales rose 6%, driven mainly by its Travel division which grew 16%, while like-for-like sales were flat. The market looked at these results in a positive light, particularly given the current difficulties facing UK high street retailers. WH Smith also stated that InMotion, the US travel retailer which WH Smith acquired in November, has shown strong sales momentum.

 

As one would expect given the strong and broad-based equity market gains, the majority of detractors were in the short book. One of the biggest was a US biopharmaceutical firm which indicated sales for its lung disease treatment will be stronger than expected, sending the stock sharply higher. In a year-end trading statement, a UK-based LED lighting company noted that despite challenging market conditions, it expects to meet expectations for 2018 adjusted operating profit.  

 

Performance since launch* (%)

 

LT European Strategic Equity Fund  January 2019 Performance 

Discrete monthly returns (A4 share class)*

 

1yr since 25/04/14
Fund -0.7% 23.2%
MSCI Europe -13.9% 21.2%
2019
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 7.6%
MSCI Europe 6.6%
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:

 

 

Dec-18

Dec-17

Dec-16

Dec-15

Liontrust GF European Strategic Equity A4 Acc EUR

-7.1

4.2

4.8

6.1

 

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

 

*Source: Financial Express, as at 31.01.2019, total return (income reinvested and net of fees). Non fund-related return data sourced from Bloomberg.

 

**Source: Financial Express, as at 31.12.2018, 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.

Friday, February 8, 2019, 3:30 PM