Liontrust European Growth Fund

December 2017 review

The Fund returned 1.1%* in sterling terms in December, compared with the 0.3% return from the MSCI Europe ex-UK index.

 

Political developments once again captured investors’ interest in December. After months of negotiation, UK and European delegates settled on a Brexit divorce bill of €40bn-€60bn. This agreement was the main hurdle for the parties to begin trade talks, which are expected to start in 2018. In the US, equities rallied as Donald Trump won his first major legislative victory after his tax reform was narrowly passed through the US Senate and the House of Representatives.

 

Away from politics, the US Federal Reserve raised interest rates once again, taking its target to between 1.25% and 1.5%, in line with market expectations. Median forecasts from members of the Federal Open Market Committee indicated that they expect interest rates to rise three times in 2018, which would match the number of hikes seen in 2017.

 

Commodity prices rallied as the year came to a close. The price of copper reached its highest level in almost four years after data from China, the world’s biggest consumer of the metal, showed imports of refined copper increased 19% in November. In the MSCI Europe ex-UK Index, the materials sector (+2.0%) was one of the best performers in sterling terms, joined by real estate (+3.4%) and consumer discretionary (+1.4%). The utilities sector (-3.7%) was by far the biggest faller, alongside telecoms (-0.9%) and energy (-0.1%).

 

Gains on the European market were led by small-caps: the MSCI Europe ex-UK Small Cap Index returned 2.6% compared with 1.3% from the MSCI Europe ex-UK Mid-Cap Index and 0.0% from the MSCI Europe ex-UK Large Cap Index. Due to the Fund’s equal-weighted rather than cap-weighted construction, and consequent overweight position to mid and small caps, this return profile was a source of positive attribution.

 

Newsflow was particularly light in December, with none of the portfolio’s largest positive and negative contributors issuing significant updates. In the absence of fundamental developments at the company level, sector trends were an influence on returns. The Fund’s holdings in the consumer discretionary sector were a positive feature as stocks such as Moncler (+14.4%) and Scandic Hotels Group (+10.4%) notched up strong gains. Swedish cosmetics group Oriflame (+5.3%)  – ostensibly a consumer staple sector constituent – also appreciated, continuing its positive run since third quarter results were released in November. Tethys Oil (+7.6%) gave the portfolio exposure to a rallying oil price, which finished the month at almost US$67 a barrel (Brent). 

 

It was a similar tale for the detractors with Straumann Holdings (-5.0%) and Simcorp (-5.2%) participating in weakness in healthcare and IT sectors. Straumann also announced the acquisition of a Portuguese dental distribution company with 20 employees, but the deal was not of sufficient scale to see financial terms disclosed. 

 

The portfolio’s position in Swedish housebuilder JM was sold following a deterioration in our cash flow investment screen scores.

 

Positive contributors to performance included:

Moncler (+14.4%), Scandic Hotels Group (+10.4%) and Tethys Oil (+7.6%).

 

Negative contributors to performance included:

Straumann Holdings (-5.0%), Simcorp (-5.2%) and Peab (-4.1%).

 

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

 

Dec-17

Dec-16

Dec-15

Dec-14

Dec-13

Liontrust European Growth I Inc

11.8

26.2

8.8

4.6

16.4

MSCI Europe ex UK

15.8

18.6

5.1

-0.7

25.3

IA Europe Excluding UK

17.3

16.4

9.3

-0.9

26.1

Quartile

4

1

3

1

4

 

*Source: Financial Express, as at 31.12.2017, total return (net of fees and income reinvested), bid-to-bid, institutional class.

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 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. The Fund’s expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation.

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.

Wednesday, January 10, 2018, 4:08 PM