Liontrust European Growth Fund

June 2020 review

The Fund returned 3.9%* in sterling terms in June. The MSCI Europe ex-UK index comparator benchmark returned 4.9% and the average return made by funds in the IA Europe ex-UK sector, also a comparator benchmark, was 4.3%.


The rebound continued for global equity markets as green shoots started appearing in economic data. The most significant of these positive economic data releases was a hugely surprising US jobs report, which confounded expectations of a decline in non-farm payrolls and a rise in unemployment. In May, the US Bureau of Labor Statistics reported a 2.5m increase in non-farm payrolls, while unemployment fell to 13.3% from 14.7% in April. European data also showed signs of encouragement, with better than expected PMI survey scores from a number of countries across the continent.


However, it was not all plain sailing for equities during June. One of the key risks to the economic recovery is a second wave of coronavirus infections and the rise in new cases this month, particularly in the US and China, gave investors cause for concern. The states of Texas and Florida reversed their reopening plans due to mounting cases, while China reinstated lockdown in a province just outside of Beijing.  In a speech before the Committee on Financial Services, Federal Reserve Chair Jerome Powell noted that the path ahead for the US economy is extraordinarily uncertain and it remains heavily dependent on the extent to which the virus’s spread is kept in check. 


Members of the European Central Bank’s governing council were equally cautious on recovery prospects. President Christine Lagarde said the virus has caused an unprecedented contraction in eurozone economic activity, as the Bank unveiled new economic projections of an 8.7% real GDP contraction in 2020. The ECB also stated that it would add a further €600bn to its pandemic emergency purchase programme, taking total bond purchases to €1,350bn. 


The MSCI Europe ex-UK Index’s returns were driven largely by cyclical sectors such as financials (+8.3%) and IT (+6.9%), while health care (+0.8%) was a laggard, having been one of the best performing sectors since the pandemic started.


AP Moller-Maersk (+19.2%) was the Fund’s strongest holding in June. The container shipping company said that trading in the second quarter had been better than expected, with volumes now anticipated to show a decline of 15-18% compared to initial guidance of 20-25%. Despite this fall in volumes, the company is on course to report Q2 earnings slightly above the previous quarter and the prior year comparable. However, earnings guidance for 2020 as a whole remains suspended due to the ongoing uncertainty.


Italian pharma company Recordati (+9.7%) saw its shares rise after announcing positive phase III results for its Isturisa treatment for Cushings disease. These results were well received by the market given the commercial potential for the drug.


Shares in BNP Paribas (+10.8%) and Bank of Ireland (+14.0%) both rebounded from May weakness alongside other financial stocks. The latter also benefited from the Irish general election result, which was seen to provide stability and continuity.


There was little news among the handful of fallers in the Fund. Facilities management company ISS (-4.7%) stated that organic revenues in April and May declined 12%, although there was some evidence of improving conditions in May. Operating margin is expected to be negative in the first half of 2020 due to an IT malware attack and lost revenue from the pandemic. However, 90% of group revenue has been retained and April was better than expected due to strong demand for the company’s deep-cleaning and disinfection services. ISS also outlined a stable liquidity profile.


Positive contributors to performance included:

AP Moller-Maersk (+19.2%), Peugeot (+14.2%) and Publicis Group (+14.0%).


Negative contributors to performance included:

Bekaert (-8.5%), Coloplast (-7.7%) and ISS (-4.7%).


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 30.06.20, 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 30.06.20, 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.

Monday, July 13, 2020, 9:49 AM