Liontrust European Growth Fund

January 2018 review

The Fund returned 1.3%* in sterling terms in January, compared with the 1.1% return from the MSCI Europe ex-UK index. **


With the holiday firmly period behind us, there was plenty of monetary and economic data news flow during the month. This started early on with the minutes from the December Federal Open Market Committee meeting confirming that the Federal Reserve remains on a gradual hike path so long as inflation stays subdued, even if the boost to growth from fiscal stimulus is taken into account. This prompted renewed confidence from some market commentators that three rate hikes in 2018 was a realistic potential outcome. As the month progressed, economic data points including in-line German and eurozone inflation data were reported, while of note, the ZEW, GfK consumer confidence and IFO surveys in Germany were all better than expected and UK GDP also surprised on the upside. Towards the end of the month, the European Central Bank (ECB) left all key interest rates unchanged. In his press conference, President Mario Draghi said the ECB remained ready to increase the asset purchase programme but noted that strong cyclical momentum was helping the eurozone economy grow at a robust pace. Speculation remains that forward guidance will be adjusted, perhaps at the March meeting.


There was a sharp focus on the sell-off in sovereign bonds. The US 10-year bond yield hit its highest level in almost four years, while the German 10-year bund yield reached a one year high. Bond prices fell as investors considered an improving outlook for the world economy and the likely result of tightening monetary conditions.


This fall in bond prices reverberated into stock markets, with defensive areas among the worst performing in the MSCI Europe ex-UK Index: consumer staples (-3.0%), utilities (-2.9%), and real estate (-2.8%). Financials (+4.4%), consumer discretionary (+2.5%) and IT (+1.4%) were the biggest gainers.


There was also a notable slide in the dollar in January (-3.0% in trade weighted terms). US Treasury Secretary Steven Mnuchin commented at the World Economic Forum in Davos that a weaker dollar would be good for the US economy. There was further pressure on the greenback as the US government shut down for three days as politicians failed to agree on a temporary spending bill.


Deutsche Pfandbriefbank (+9.6%) and investment manager Partners Group Holding (+7.8%) both participated in the rally in financial stocks. The latter recorded a 14% increase in assets under management in 2017, helped by €13bn in new client commitments, which was slightly higher than the €10bn-€12bn guidance. For 2018, Partners Group guided client demand to be €11bn-€14bn.


Technogym (+7.5%) was named as the official fitness equipment supplier for the 2018 Winter Olympics in Pyeongchang, South Korea. It represented the seventh Olympic games (both summer and winter) in which the company has been the official fitness supplier. 


Of the detractors, Nordic hotels operator Scandic Hotels Group’s (-26.7%) shares fell after it stated adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) for the fourth quarter of 2017 is expected to be c.16% lower than the same period in 2016. This was a result of weaker earnings from operations in Sweden and one-off personnel costs.


Loomis (-9.5%) and Software AG (-8.3%) both disappointed the market with fourth quarter results. Cash handling company Loomis stated pre-tax profit in the final quarter of 2017 was SEK496m, up from SEK477m in 2016, but below the analyst consensus of SEK524m. Revenue showed a 1% decrease to SEK4.36bn and missed the market’s expectation by 2%. Software AG posted a 2% annual increase in group revenue, led by its Digital Business Platform. However, analysts said the group’s Q4 results were a touch below expectations and the outlook for 2018 was also soft.  


Positive contributors to performance included:

Deutsche Pfandbriefbank (+9.6%), Partners Group Holding (+7.8%) and Technogym (+7.5%).


Negative contributors to performance included:

Scandic Hotels Group (-26.7%), Loomis (-9.5%) and Software AG (-8.3%).



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 31.01.2018, 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.


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.

Thursday, February 15, 2018, 11:12 AM