Liontrust European Growth Fund

August 2019 review

The Fund returned -1.6%* in sterling terms in August, compared with the -1.2% return from the MSCI Europe ex-UK index.


European stocks joined the global equity slump as US-China trade tensions weighed on sentiment once again. Trump announced at the beginning of the month that the US would impose a 10% tariff on US$300bn worth of Chinese imports on 1 September. The following day the Chinese renminbi fell to its lowest level against the US dollar since February 2008, resulting in accusations of currency manipulation from the US and fears that a currency war could add to trade woes. Trump added fuel to this fire by continuing his attacks on the Federal Reserve for keeping the dollar too high.


As the month wore on, Trump stated that tariffs would be delayed on around US$155bn worth of consumer goods until December with the aim of reducing the impact on consumers ahead of Christmas. However, he later raised the tariff rate to 15% and warned US companies to exit the Chinese market. China stated that it will retaliate with “necessary countermeasures” and commented that the US had seriously violated the agreement struck by the two countries in the Osaka G20 meeting. 


As has been the case in previous episodes of US and China trade tensions, defensive assets benefitted. Gold is an obvious illustration of this, with the metal hitting its highest level for over six years. It was also apparent in equity market sector trends; in the MSCI Europe ex-UK Index, consumer staples (+3.2%), utilities (+2.6%) and health care (+1.9%) were the best performers in sterling terms. Financials (-5.0%), energy (-5.0%) and IT (-4.7%) experienced the worst of the sell-off.


The Fund’s energy allocation presented a headwind to performance as oil prices were depressed by the escalation in the US-China trade dispute. Meanwhile, clothing companies Moncler (-9.1%), Adidas (-7.7%) and Kering (-7.0%) all suffered amid the rotation out of cyclical areas of the market.


Adidas also reported second quarter earnings. Operating profit rose 9% to €643 million, which was a touch below analysts’ forecasts of €648m. However, the company said that sales growth in its target area of Greater China continued at a double-digit rate and added that it maintains guidance for the full-year.


Danish drinks group Royal Unibrew (+15.8%) stated that EBIT (earnings before interest and taxes) for 2019 is now expected to be at the upper end of its Dkr1.44bn-Dkr1.47bn guidance after posting strong interims. The company recorded an 11% increase in EBIT in the first six months of 2019, with contributions from all its segments. Royal Unibrew has been increasing its focus on addressing new customer trends within areas such as “good for you”; low/no sugar beverages were among the top performing segments in the first half.


Novo Nordisk (+8.9%) announced that sales growth at constant currencies is expected to be between 4% and 6% in 2019, higher than its previous estimate of between 2% and 5%, while operating profit growth guidance was raised and narrowed to 4%-6% from 2%-6%. The diabetes focused healthcare company said the upgraded guidance was a result of a strong interim period, in which net sales increased 5% and operating profit rose 6%.


Three holdings were sold from the Fund in August. Positions in Dassault Aviation, Eramet and Swedish Match were all exited.


Positive contributors to performance included:

Royal Unibrew (+15.8%), Novo Nordisk (+8.9%) and Elisa (+6.8%).


Negative contributors to performance included:

Subsea 7 (-10.7%), Moncler (-9.1%) and CIE Automotive (-8.9%).


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








Liontrust European Growth I Inc






MSCI Europe ex UK






IA Europe Excluding UK












*Source: Financial Express, as at 31.08.2019, total return (net of fees and income reinvested), bid-to-bid, institutional class.
Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 03.07.2019, total return (net of fees and income reinvested), bid-to-bid, primary class.

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. 


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.

Tuesday, September 17, 2019, 2:42 PM