Liontrust European Growth Fund

February 2019 review

The Fund returned 2.5%* in sterling terms in February, compared with the 2.2% return from the MSCI Europe ex-UK index.


European equity markets extended January’s strong start to the year, taking the year-to-date sterling terms return to 5.3% (and to 10.6% in euro terms). The rise was supported by the ongoing easing of trade tensions between the US and China, which included speculation that the increase in tariffs scheduled for 1 March would be suspended for another 60 days.


As well as de-escalation of trade worries, the other factor providing market momentum recently has been key central banks’ softening of rhetoric on monetary tightening. Minutes from January’s meeting of the US Federal Reserve’s Open Market Committee confirmed that it is considering a pause to Quantitative Tightening later in 2019. Comments regarding the path of interest rates seemed to straddle both sides of the fence – some members noting that only higher inflation would necessitate rate rises, with others instead indicating that rate hikes would be appropriate if the economy progressed as expected during the year. Either way, it did not give strong backing to the Fed’s prior ‘dot plot’ for two rate rises in 2019.


While interest ahead of Trump’s Vietnam summit with North Korean President Kim was muted – especially when compared with last year’s meetings between the pair – some late-month volatility was triggered by the abrupt termination of talks which had floundered on the second day. The latest in a seemingly interminable series of Brexit developments saw Theresa May agree to votes on ‘no deal’ and an extension to the 29 March exit date if her revised deal fails to win support in an earlier vote.


Gains on European markets were fairly broad-based: industrials (+3.9%), finance (+3.4%) and materials (+3.4%) were among those sectors to marginally outperform the market average. Real estate (-4.0%) and utilities (-2.1%) were the only real outliers.


Shares in Mediobanca (+14.2%) rallied on the release of its best half-year results ever, covering the six months to 31 December 2018. The Italian bank disclosed 8% year-on-year growth in loans to 43bn. All divisions made a positive contribution to gross operating profit, which rose 16% to €606m.


French aerospace company Dassault Aviation (+11.9%) also rose on the back of results. Its 2018 numbers were stronger than expected: adjusted net sales rose 4.2% to €5.08bn while order intake was up by an impressive 50% at €5.02bn, leaving the company with an order backlog of €19.4bn. In addition to top-line growth, operating margins also expanded from 7.3% to 13.2%, meaning that adjusted operating income jumped 87% to €669m.


Asset management software provider Simcorp (+12.9%) finished the year with strong Q4 sales, up 13% to €129m, while order intake of €61m represented a 23% year-on-year rise. For 2019 it expects revenue growth of between 8% and 13%. 


A couple of the Fund’s materials sector holdings showed some weakness in February after releasing 2018 results. Rising metal prices and favourable markets for mineral sands helped French mining group Eramet (-14.8%) increase 2018 sales by 5% to €3.83bn, although EBITDA (earnings before interest, tax, depreciation and amortisation) slipped 3% to €843m, below consensus exceptions. The company cited divisions including High Performance Alloys as holding back performance. Net income for 2018 of €129m from paper and pulp manufacturer Ence Energia y Celulosa (-8.1%) – although up 40% on 2017 – was slightly below consensus expectations.


Positive contributors to performance included:

Mediobanca (+14.2%), Simcorp (+12.9%) and Dassault Aviation (+11.9%).


Negative contributors to performance included:

Eramet (-14.8%), Ence Energia y Celulosa (-8.1%) and Deutsche Boerse (-6.0%).


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 28.02.2019, 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 31.12.2018, 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. 


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.

Wednesday, March 20, 2019, 1:27 PM