Liontrust GF European Strategic Equity Fund

June 2018 review

The Fund’s A4 share class returned -2.6%* in euro terms in June (A3 share class -2.6%), compared with the -0.7% return from the MSCI Europe Index and -1.4% return from the HFRX Equity Hedge EUR Index.

 

Net exposure at month end reduced to c.38%. A positive contribution from the short book was wiped out by weakness in the long book, which was dragged lower by underperforming consumer discretionary stocks as investors favoured more defensive areas of the market.

 

This move to defensive sectors was partly due to the threat of a trade war. China and the US were unable to come to a trade agreement and soon after negotiations ended President Trump confirmed tariffs of 25% on US$50bn worth of Chinese imports. China outlined retaliatory actions and both sides threatened to increase these proposed measures.

 

The exchange of hostilities hit sentiment in European markets, causing a clear defensive tilt. Utilities (+1.8%) was the best performing sector in the MSCI Europe Index in euro terms, with consumer staples (+1.3%) and health care (+0.8%) also strong gainers. The one traditionally defensive sector to underperform was telecoms (-0.7%), but was still some way off consumer discretionary (-4.8%), which was the biggest laggard.

 

There was also significant central bank news this month. The US Federal Reserve raised its target for the Fed Funds rate by 25bps to 1.75%-2.0%. The Federal Open Market Committee’s forecast of future interest rates showed it expects to hike rates twice more in 2018, once more than the guidance given in March.

 

The European Central Bank (ECB) unveiled plans to wind down quantitative easing. The bank stated that its monthly asset purchases will fall from €30bn to €15bn in September 2018 and then end in December 2018, though interest rates were unlikely to change until at least summer 2019. The decision preceded the latest inflation data for the eurozone. Annual CPI in June was estimated to be 2.0%, up from 1.9% in May and largely in line with the ECB’s target of close to, but below, 2%. However, core inflation – which strips out volatile items such as energy and food - remained sluggish and slipped to 1.0% from 1.1% in May.

 

The Fund’s performance was behind the market mainly due to its long book holdings. Newsflow was in short supply during June and major stock movements were mainly driven by investor sentiment. Ferrexpo (-17.1%) and Anglo American (-6.4%) were part of an underperforming materials sector (-2.1%). A rise in the dollar had the inverse effect on commodity prices and hit miners.

 

Global chipmakers were hurt by escalating trade war concerns. Siltronic (-15.2%) was among them, particularly because of its Asian exposure (68% of revenue in 2017). Meanwhile gambling company 888 Holdings (-10.7%) gave up the gains it made in May, when the US Supreme Court struck down a federal law which banned sports betting in the entire country. Other poor performers in the consumer space for the long book were CIE Automotive (-11.8%) and Scandic Hotels Group (-11.5%).

                                                                               

One of the bright spots for the long book was Intertek Group (+3.7%). The testing and inspection company announced the acquisition of cyber security and assurance company NTA Monitor.

 

The short book delivered a stronger performance. One of the main contributors was a LED lighting products company which announced it will incur a one-off cost after closing its loss-making US business. A disposable personal hygiene products company was also a contributor after brokers highlighted concerns about the company’s Brazil business.

 

Performance since launch* (%)


LESEF Performance Chart June 

 

Discrete monthly returns*

 

1yr since 25/04/14
Fund** 3.0% 23.4%
MSCI
Europe
2.9% 27.0%
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%
MSCI
Europe
1.6% -3.9% -2.0% 4.6% 0.1% -0.7%
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 30.06.2018, total return (income reinvested and net of fees).

 

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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. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

Investment in the Fund involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. 

Disclaimer

This content 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy.  It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. 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, July 16, 2018, 4:44 PM