Liontrust European Growth Fund

December 2019 review

The Fund returned 2.8%* in sterling terms in December, compared with the 1.0% return from the MSCI Europe ex-UK index and the 1.5% average return made by funds in the IA Europe ex-UK sector.

 

US-China trade negotiations remained the market’s primary focus as the pair edged closer towards a trade agreement. A “phase one” deal, which would see both countries pare back existing tariffs, has been touted for some time but significant strides were made in December. In the days leading up to December 15, the scheduled date for additional US tariffs, Trump said that a deal was “very close” and officials from China also conveyed optimism. The US eventually scrapped the planned tariffs on US$156bn worth of goods and said a truce is expected to be signed in January.

 

Elsewhere, Christine Lagarde took charge of her first European Central Bank monetary policy meeting, in which the bank maintained policy as expected. Of more interest was Lagarde’s press conference as investors looked for clues over the direction the new president will take for ECB policy. When questioned about whether she is a hawk or a dove, Lagarde remarked that she considers herself as an owl. She also revealed plans for a strategic review of the ECB’s monetary policy.

 

It became increasingly likely that the early part of Lagarde’s presidency would overlap with the UK’s exit of the European Union after the Conservative Party won a majority in the UK’s general election. The result gave Boris Johnson a mandate to pass his Brexit deal through parliament and execute the divorce. Initially, the pound rose sharply higher on the perceived clarity of direction, but soon gave up these gains as the market evaluated the economic consequences of Johnson’s Brexit plan.

 

The sector split on the MSCI Europe ex-UK showed that aside from communication services (-3.6%) and consumer staples (-0.5%), every other sector ended higher with the best performers financials (+2.4%), energy (+2.3%) and materials (+1.9%).

 

The Fund exceeded the returns made by the MSCI Europe ex-UK Index, in part thanks to its overweight allocation to the energy sector. Stocks such as Tethys Oil (+14.2%), Subsea 7 (+12.3%) and Lundin Petroleum (+9.1%) were among the highlights. Brent oil rose 5.7% over the month as traders became more optimistic about a US-China trade deal and data showed US crude inventories fell to their lowest level in two months.

 

Gucci owner Kering (+6.4%) was reported to have held exploratory talks with Italian luxury skiwear company, and fellow long book holding, Moncler (+1.1%) about a potential acquisition. This follows further consolidation in the luxury fashion industry with LVMH’s recent acquisition of Tiffany & Co.

 

Positive contributors to performance included:

Peab (+15.6%), Tethys Oil (+14.2%) and Subsea 7 (+12.3%).

 

Negative contributors to performance included:

Telenor (-3.3%), Mediobanca (-3.0%) and CIE Automotive (-2.9%).

 

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

 

 

Dec-19

Dec-18

Dec-17

Dec-16

Dec-15

Liontrust European Growth I Inc

24.6

-12.8

11.8

26.2

8.8

MSCI Europe ex UK

20.0

-9.9

15.8

18.6

5.1

IA Europe Excluding UK

20.3

-12.2

17.3

16.4

9.3

Quartile

1

3

4

1

3

 

*Source: Financial Express, as at 31.12.2019, 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 31.12.2019, total return (net of fees and income reinvested), bid-to-bid, primary class.


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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.

Tuesday, January 14, 2020, 5:25 PM