Liontrust European Growth Fund

August 2020 review

The Fund returned 3.3%* in sterling terms in August. The MSCI Europe ex-UK index comparator benchmark returned 2.2% and the average return made by funds in the IA Europe ex-UK sector, also a comparator benchmark, was 2.5%.


July’s fall was seemingly just a blip in the extraordinary recovery seen in global equity markets since the initial coronavirus crash. From the market trough at the end of March, the MSCI Europe ex-UK Index has returned 31% in sterling terms.


A large driver of these gains has been the significant monetary and fiscal stimulus from central banks and governments around the world. In August, Federal Reserve Chair Jerome Powell gave markets an indication that the monetary support will continue for some time yet. In a speech made during the Jackson Hole central bank summit, Powell said that the Fed will be more tolerant of temporary increases in inflation above its 2% target to ensure that average inflation continues to trend at 2% over time. This new policy, which Powell described as “flexible” average inflation targeting, will likely see interest rates remain at current rock bottom levels even if the US inflation starts to accelerate.


Cyclical sectors led the way in Europe during August. Industrials (+6.2%), consumer discretionary (+6.1%) and energy (+5.1%) were the best performers, while utilities (-1.6%), health care (-1.5%) and consumer staples (-0.9%) were the only sectors to end the month lower. August also saw value stocks outperform. The MSCI Europe ex-UK Value Index rose 2.9% in sterling terms compared to the MSCI Europe ex-UK Growth Index’s 1.7% return.


Integrated shipping company AP Moller-Maersk (+18%) saw its shares rise after providing updated guidance. The company had suspended its full year forecasts in March due to uncertainties, but said that it expects earnings before interest, taxes, depreciation and amortisation (EBITDA) to be between US$6bn-7bn for 2020. This is higher than its pre-suspension guidance of US$5.5bn. This came on the back of a strong second quarter where EBITDA improved by 25% despite the Covid-19-related headwinds.


Shares in Danish jewellery company Pandora (+13%) ended the month higher, despite falling following the release of its second quarter results. Revenue declined 39% year-on-year but still came in ahead of analyst forecasts as did the organic revenue decline of 38%, which was expected to fall by 40%. However, the group warned that the improvement seen in sales during the second quarter has stalled in Q3 due to new surges in Covid-19 cases. It added that the outlook remains uncertain but reinstated its 2020 guidance for a 14%-20% fall in organic revenues and EBIT margin between 16%-19%.


Deutsche Pfandbriefbank’s (+12.3%) second quarter results were more positive. Net interest income rose slightly year-on-year to €118m. The company said there were a number of factors that produced a positive impact during the quarter including a trend towards higher new business margins and lower funding expenses. These higher margins offset the impact of lower volumes. The company also said it does not currently expect to make further loan loss provisions for the rest of the year.


Danish medical devices company Coloplast (-2.4%) reported on a significant negative Covid-19 impact during the three months to 30 June 2020. Organic growth declined 2%, while reported revenue contracted 4%, as the company felt an adverse impact from previous stock building in a number of its markets. Coloplast lowered its guidance for full year organic growth to 4% from its previous forecast of 4-6%.

Facilities management company ISS (-2.0%) said its financial performance has suffered due to Covid-19 and a malware attack. Organic growth declined 9.9% in the second quarter of 2020, despite strong demand for its deep cleaning and disinfection services. The company said organic growth for the year as a whole is expected to fall between 2% and 10%, while operating margins are forecast to be marginally positive.


Positive contributors to performance included:

AP Moller-Maersk (+18%), Pandora (+13%) and Amadeus IT Group (+9.8%)


Negative contributors to performance included:

Elisa (-3.2%), Coloplast (-2.4%) and ISS (-2.0%)


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 31.08.20, 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 30.06.20, 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.

Thursday, September 17, 2020, 4:07 PM