Liontrust European Growth Fund

March 2018 review

The Fund returned -1.6%* in sterling terms in March, compared with the -3.3% return from the MSCI Europe ex-UK index.


European stocks took another leg lower in March, this time due to growing concerns of a trade war. US President Donald Trump announced a 25% tariff on steel imports and a 10% tariff on aluminium imports. This raised the expectation of retaliation from other major powers and Trump’s hint that some trading allies will be temporarily spared from the tariffs was not enough to reverse market sentiment. In addition, Trump announced a 25% tariff on up to US$60bn in annual imports from China.


Elsewhere, global monetary policy continued to tighten. New US Federal Reserve Chair Jerome Powell oversaw the central bank’s first interest rate increase of 2018. Though the Federal Open Market Committee’s dot-plot of future interest rate estimates showed no change to the three projected hikes in 2018, its rate expectations for 2019 were upgraded. The European Central Bank dropped wording about expanding its bond-buying programme from its policy statement, indicating another step towards curbing its quantitative easing scheme.


Equity indices across the globe took a hit from this mixture of events and in the MSCI Europe ex-UK Index most sectors ended lower in sterling terms. Having been more resilient in recent months financials (-6.8%) and materials (-5.2%) were among the worst performers. The reverse was true for the gainers, with utilities (+3.3%) and real estate (+1.9%) having had poor performances prior to March.


The consumer discretionary sector was one of the main sources of positive attribution for the Fund which helped it outperform the MSCI Europe ex-UK Index. Technogym (+15.5%) was a large gainer after the gym equipment manufacturer and service provider released robust 2017 results with a net profit increase of 41% to €61.2m, which came in ahead of consensus. Revenue grew in all of the company’s geographic areas, with North America providing the fastest growth of 13% and an upbeat outlook pointed to further growth in revenue and profit for 2018.


Portuguese energy company EDP-Energias de Portugal (+11.1%) was another to see its shares rise, despite reporting difficult conditions in 2017. Gross profit during the year fell 6% while recurring EBITDA (earnings before interest, taxes, depreciation and amortisation) fell 5% due to an extreme drought in Portugal and Spain reducing its hydro resources.


The energy sector was one of the weaker areas for the Fund with Fred Olsen Energy (-38.8%) and Subsea 7 (-18.0%) dragging on performance. Subsea 7’s shares declined after reporting disappointing fourth quarter results. The engineer and energy services company stated that adjusted EBITDA was US$176m, below the consensus estimate of US$214m. Net income during the period also came in below the market view but revenue was in line. 


Elsewhere, Deutsche Pfandbriefbank (-11.6%) reported a 21% rise in pre-tax profit in 2017 to €204m, driven by net interest and commission income. However, management guided pre-tax profit for 2018 to be between €150m-€170m reflecting lower aggregate net interest and commission income and costs in relation to its real estate finance portfolio. 


In keeping with the Cashflow Solution investment process, we began our annual review of companies’ report and accounts. In upcoming months we will implement changes to the Fund holdings in line with our findings from the review.              



Positive contributors to performance included:

Technogym (+15.5%), EDP – Energias De Portugal (+11.1%) and SimCorp (+9.8%).


Negative contributors to performance included:

Fred Olsen Energy (-38.8%), Subsea 7 (-18.0%), and Covestro (-15.3%).



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 31.03.2018, total return (net of fees and income reinvested), bid-to-bid, institutional 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. 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 the Fund involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The 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 portfolio.


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.

Wednesday, April 18, 2018, 10:55 AM