Liontrust GF European Strategic Equity Fund

July 2018 review

The Fund’s A4 share class returned 2.0%* in euro terms in July (A3 share class 2.1%), compared with the 3.1% return from the MSCI Europe Index and 0.5% return from the HFRX Equity Hedge EUR Index.

 

Net exposure at month end was c.40%. As European equities rebounded from a fall in June, the long book delivered a strong return, outpacing the MSCI Europe Index. The short book only detracted slightly from the performance of the Fund, a good result given the rising market.

 

Inevitably, trade war news was ever-present on front pages throughout July. President Trump imposed a tariff on US$34bn worth of Chinese imports, to which China retaliated with levies of its own. Throughout the month Trump signalled that he is willing to impose tariffs on up to US$500bn of Chinese goods.

 

However, the developments in the relationship between the US and Europe were more positive. Trump met with President of the European Commission Jean-Claude Juncker late in the month and the pair reached an agreement to cease any further escalation of trade barriers and work on reducing the tariffs already in place. This meant the US would refrain from imposing duties on European car makers, which helped lift share prices in the auto sector. Peugeot (+25.8%) was one of the long book holdings to benefit from this.

 

Away from trade wars, economic growth in the eurozone slowed to a quarterly rate of 0.3% according to the first estimate of Q2 GDP, compared to 0.4% in the first quarter. While the rate was below expectations, it is unlikely that it will derail the European Central Bank’s plans to end quantitative easing.

 

The performance of the MSCI Europe Index was once again driven by defensive sectors, with health care (+6.3%), telecoms (+3.6%) and consumer staples (+3.5%) all among the best performers in euro terms. The biggest laggards were real estate (+0.4%), energy (+0.8%) and materials (+1.3%).

 

Scandic Hotels Group (+20.9%) and Siltronic (+21.7%) were both among the long book’s best performers following the release of interim results. Hotel operator Scandic saw second quarter net sales increase by 26% year-on-year to SEK4.75bn, which was ahead of the SEK4.61bn consensus forecast. This was driven by the group’s Restel acquisition in January and other hotel openings. Semiconductor company Siltronic said high demand for wafers boosted sales by 27% year-on-year in the first six months of the year and gross profit doubled. The group slightly lifted its forecasts for the full year on the back of this.

 

Consumer credit provider International Personal Finance (+17.0%) rose after it stated in a trading update that pre-tax profit for 2018 was set to be 10% ahead of consensus estimates following a stronger than expected performance by its European home credit businesses. Later in the month, it released full interim results which showed a 15% increase in pre-tax profit.

 

Stora Enso’s (-15.7%) interim results were less well received. The paper and packaging company’s results missed expectations partly due to tight wood supply in the Nordics, which contributed to higher variable costs. Stora Enso stated that the short supply of wood is expected to cost the company €10m in the third quarter, meaning earnings before interest and taxes are expected to be similar to levels seen in the second quarter.

 

In the short book, one of the detractors was a diaper maker which received a takeover bid from a private equity firm. The initial bid was rejected but there was progress between the two companies following an improved offer. Another detractor was an Italian football club which saw its share price rise after making a high profile signing. A digitisation company was the biggest contributor to the short book. It issued the profit warning after seeing delays in some substantial deals.

 

Performance since launch* (%)

 

Liontrust GF European Strategic Equity Fund July 2018 review

 

Discrete monthly returns*

1yr since 25/04/14
Fund** 5.3% 25.9%
MSCI
Europe
6.4% 31.0%
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%
MSCI
Europe
1.6% -3.9% -2.0% 4.6% 0.1% -0.7% 3.1%
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%
**A4 share class

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


Jun-18

Jun-17

Jun-16

Jun-15

Liontrust GF European Strategic Equity A4 Acc EUR

3.0

5.3

2.9

10.1


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


* Source: Financial Express, as at 31.07.2018, total return (income reinvested and net of fees).

**Source: Financial Express, as at 30.06.2018, 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. 

Wednesday, August 8, 2018, 12:18 PM