Liontrust European Growth Fund

July 2021 review

The Fund returned 1.3%* in sterling terms in July. The MSCI Europe ex-UK index comparator benchmark returned 1.5% and the average return made by funds in the IA Europe ex-UK sector, also a comparator benchmark, was 1.6%.


Despite a mid-month wobble triggered by growing concerns over the spread of the Delta variant of Covid, European equity markets rallied to notch up a small gain for the month. Within this, IT (+4.9%), real estate (+3.5%) and healthcare (+3.0%) were the strongest areas but energy was the biggest laggard (-5.1%) by some margin.


The oil price was broadly flat on the month, finishing at US$76.3 a barrel, but there was some intra-month volatility on the global growth concerns and following an Opec meeting at which the cartel decided to restore output to pre-pandemic levels, but only by the end of 2022.


The pattern of equity market returns was not mirrored by bond markets – the mid-month dip in investor sentiment drove yields down but they did not rebound as equities recovered. Partial explanation for this pattern could be found in the key central bank policy announcements during the month: firstly, the European Central Bank said it could tolerate inflation temporarily higher than its new 2% target, opening the door for loose policy to be retained; and the US Federal Reserve commented that, although progress had been made towards its employment and inflation goals, it was still too early to tighten policy.


Deutsche Pfandbriefbank (+11%) recorded a large year-on-year increase in profit before tax in the first half of 2021, up to €114m from €30m. Increases in net interest, commission income and prepayment fees were bolstered by a big drop in loan loss provisions. Based on the strength of the first-half performance, the company upgraded its full-year 2021 pre-tax profit guidance substantially from “at least €155m” to “between €180m and €220m”.


Shares in Simcorp (+10%) steadily rose through the month despite issuing no significant corporate news. On the last day of June it has announced a “large agreement” with alternative asset manager LGT Capital Partners choosing to use its cloud-based investment management platform. Coloplast (+11%) also had a quiet month in terms of newsflow, although benefitted from some broker rating upgrades.


The energy sector was by far the weakest in European markets and this was reflected in the portfolio, where the Fund’s overweight position detracted from performance. Subsea 7 (-17%) and Lundin Energy (-12%) were the two most notable fallers.


First-half earnings at Subsea 7 improved substantially on last year – moving from a US$9m EBITDA loss to a US$90m profit – but still fell short of consensus expectations, which had been for closer to US$145m. The Norwegian oil & gas engineering and support services specialist commented that profit margins were depressed in its Subsea and Conventional divisions, partly as it executed contracts it had won in a competitive pricing environment in 2019 and 2020, but it expects this to improve in the second half of the year. The company had a book-to-bill ratio of 1.6 in Q2, pushing its order backlog up to US$6.8m from US$6.0bn in Q1.


Lundin Energy (-12%) slipped on the announcement that it would be taking a Q2 income statement charge of US$119m of exploration and appraisal costs that did not yield a commercial discovery. Later in the month it released interim results that displayed strong operating trends: record Q2 revenue of US$1.3bn (following an average realised oil price of US$68 a barrel) and record free cash flow of US$949m.


The drop in Randstad’s (-5.8%) shares may be indicative of some profit taking, after issuing Q2 results that painted a pretty healthy picture. Revenues recovered 37% year-on-year to now sit above the 2019, pre-pandemic comparable. The company commented that volume trends in early July show ongoing positive momentum and underpin a positive outlook for the remainder of the year.


Positive contributors to performance included:

Deutsche Pfandbriefbank (+11%), Coloplast (+11%) and Simcorp (10%).


Negative contributors to performance included:

Subsea 7 (-17%), Lundin Energy (-12%) and Randstad (-5.8%).


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 31.07.21, 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 30.06.21, 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.

Friday, August 13, 2021, 10:02 AM