Liontrust GF European Strategic Equity Fund

September 2018 review

The Fund’s A4 share class returned 1.8%* in euro terms in September (A3 share class 1.9%), compared with the 0.5% return from the MSCI Europe Index and -1.9% return from the HFRX Equity Hedge EUR Index.

 

Net exposure at month end was c.43%. The MSCI Europe Index return fails to tell the tale of a month which saw a sharp fall at the beginning of September followed by a recovery in the second half. Pleasingly, this pattern created an environment in which both the long and short book could contribute positively to Fund performance. The long book was helped by strong returns from the oil and gas and mining sectors, while poor trading updates and sector trends were responsible for the short book performance.

 

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 and 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 strong bounce back in European stocks in the second half of the month, driven mainly by the resource sectors. Energy (+5.8%) was the best performing sector in the MSCI Europe Index in euro 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. Stocks in the materials sector (+2.0%) were also strong gainers, as were financials (+2.0%). Real estate (-3.9%), IT (-2.8%) and consumer staples (-1.3%) fell.

 

The long book’s mining stocks made a significant contribution to the Fund’s returns. Having been among the worst performers in August, Ferrexpo (+29.7%), Anglo American (+12.3%) and Evraz (+11.7%) rebounded. The sector rallied on relief that tariffs imposed by the US and China were lower than expected. The long book’s oil stocks, which include BW Offshore (+11.1%) and Lundin Petroleum (+10.2%), were also strong performers as they tracked the rise in oil prices.

 

Away from oil and gas and basic materials, Sberbank of Russia (+16.6%) was another gainer this month. The company’s share price has recently tracked geopolitical events closely and this time it was buoyed by signs that the US Senate is leaning against restricting Russian banks’ dollar transactions. Though a decision has yet to be made, the softening in stance was enough to boost Sberbank shares.

 

Silicon wafer supplier Siltronic (-15.5%) was one of the long book detractors as the company, alongside the rest of the sector, continued to feel the strain from the US-China trade dispute. This was also the case for a sensor technology company, which was the biggest contributor to the Fund’s short book.

 

Another contributor to short book performance was a fertilizer development company which experienced a fall in its share price after it stated that costs for one of its contracts will be higher than first expected. An online clothing retailer was a short book detractor. The company raised its full year guidance after recording a strong increase in revenue and profit in the first half of its financial year.


Performance since launch* (%)

LESEF performance since launch 

Discrete monthly returns (A4 share class)*

1yr since 25/04/14
Fund 2.6% 25.7%
MSCI Europe 1.5% 28.7%
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%
MSCI Europe 1.6% -3.9% -2.0% 4.6% 0.1% -0.7% 3.1% -2.3% 0.5%
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:

 

 

Sep-18

Sep-17

Sep-16

Sep-15

Liontrust GF European Strategic Equity A4 Acc EUR

2.6

5.2

0.7

14.5

 

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

 

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

 

**Source: Financial Express, as at 30.09.2018, 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. 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, October 10, 2018, 11:52 AM