Luxcellence-Liontrust SF Pan European Equity Fund

Q2 2018 review

The Fund returned 2.7% over the quarter, lagging the MSCI Europe Index’s 4.0%*.

Q2 has been a fairly volatile period for Europe, both politically and in terms of markets, with escalating fears of a global trade war weighing on sentiment.

April saw a strong rally after the correction in the first quarter but this faded in May in the face of weakening leading indicators, global trade tariffs and political upheaval in Italy and Spain. Trade war fears picked up a notch in June, with the US imposing tariffs by refusing to extend the eurozone’s exemption from 25% duties on imports of steel and 10% on aluminium.

In response, the EU introduced matching import duties on a range of US products, including steel and aluminium, farm produce such as sweetcorn and peanuts, bourbon, jeans and motorbikes.

Our process remains focused on high-quality companies with long-term sustainability drivers that should grow regardless of the economic or political backdrop but as ever, we are monitoring the situation on trade, as well as ongoing political volatility, for potential impacts on growth trends across Europe.

In terms of individual stock drivers, Kingspan was among the best performers over the quarter. The global leader in technology related to insulation panels and boards continues to deliver strong growth across the US and Europe and this is despite headwinds for overall construction markets coming from Brexit in the UK and weather issues in the US.

The importance of insulation as a means of cutting energy use in both commercial and residential construction, combined with Kingspan’s technological lead, underpin a business that continues to beat market expectations and can grow based on these two structural drivers.

Elsewhere, Informa also enjoyed a strong second quarter, having recently taken the transformative decision to buy UBM, one of the world’s largest exhibition companies.

Informa is a leading events and publishing company based in the UK, operating an academic book and journal publishing division under the famous brands Taylor & Francis and Routledge. Informa also operates a business analytics division, providing firms with current and accurate information to improve decision making, as well as large exhibitions and conference operation, which enables stakeholders across all industries to learn and interact face-to-face.

The deal for UBM will make the combined entity the sector leader and should yield significant synergies over the coming years, but we have reservations about the price paid and the structure of the deal.

Among the weaker performers over the quarter was Prysmian. We like the company for its leadership position in connectivity, which includes highly technical deep sea projects, but problems at one of these projects in the UK, the Western Link project, resurfaced and drove a profit warning.

In the past, Prysmian’s management has been able to contain and resolve project issues after initial mistakes so we are confident it can do so again – but these can be costly prolonged problems so we are watching the situation closely.

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

 

 

Jun-18

Jun-17

Jun-16

Jun-15

Jun-14

Luxcellence Liontrust Sustainable Future
Pan-European Equity Fund A Class

1.1

17.6

-12.1

25.8

16.3

MSCI Europe

2.8

18.0

-11.0

13.5

22.7

 

*Source: Financial Express, as at 30.06.18, primary share class, in euro terms, total return, net of fees and income reinvested.

 

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. 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.

The Sub-Fund has underlying holdings which are denominated in currencies other than Euro and therefore may be affected by movements in exchange rates. The Sub-Fund can use derivatives in order to meet its investment objectives or to protect from price and currency movements. This may result in gains or losses that are greater than the original amount invested. Funds which undertake ethical screening to meet their investment aims are unable to invest in certain sectors and companies. The fund may invest into convertible bonds. Since convertible securities are bonds that can be converted into ordinary shares, this Sub-Fund may go up or down in value at an increased rate or to a greater extent than an ordinary equity fund, which may have a positive or negative impact on the value of your investment. 

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 23, 2018, 10:42 AM