Liontrust European Growth Fund

March 2019 review

The Fund returned 1.8%* in sterling terms in March, compared with the 2.5% return from the MSCI Europe ex-UK index.


The same factors behind the market’s year-to-date rise were at play again in March: easing US-China trade tensions and more dovish central bank policy. Starting with the former, President Trump declared that the trade negotiations with China were “coming along nicely” though he stated that current tariffs will remain in place until he’s sure Beijing will comply with any potential agreement. The trade war, which escalated in 2018, has dragged on global economic growth, so any indication that there could be a benign resolution tends to lift markets around the world.


Central bank policy has been a key feature for markets. Since the turn of the year, the US Federal Reserve has communicated a more “patient” approach to adjusting its monetary stance. In March, the Federal Open Market Committee’s estimates for future interest rates implied zero rate increases in 2019, which was scaled back from two forecast rises back in December. The policy setting committee also confirmed it would pause quantitative tightening by the end of September, citing slowing economic growth, household spending and business investment during the first quarter.


The European Central Bank also made a small adjustment to its forward guidance. It had previously stated that interest rates would remain at present levels until summer 2019, but in March the Governing Council guided that rates will be on hold until the end of 2019 as inflation remained sluggish in the euro area. The bank also unveiled new targeted longer-term refinancing operations (TLTRO-III) to boost the banking system.


These central bank moves provided a broad uplift to markets, with defensive sectors leading the rise. Consumer staples (+7.0%) was the best performing sector, while health care (+5.5%) and utilities (+5.3%) also posted strong returns. The only sector to register a decline was financials (-1.9%), as banks typically benefit from higher interest rates.


The portfolio’s cyclical bias meant that it missed out on some of the defensive rally, but this was partially offset by strong stock selection. SimCorp (+10.6%) was one of the holdings to perform well in March. Having reported strong fourth quarter results last month, there was more positive news from asset management software provider in March. The company announced a new deal to provide systems for Willis Towers Watson’s delegated investments business. Meanwhile, EDP – Energias de Portugal’s (+9.4%) shares rose after it unveiled plans to raise over €4bn from the sale of majority stake projects, which it will reinvest in its renewable business.


Among the fallers was Spanish pulp producer Ence Energia y Celulosa (-20.3%). The stock dropped after the Spanish General State Administration moved to nullify a 2016 resolution which granted Ence an extension of the concession of lands for the company’s Pontevedra plant. Ence estimated that the maximum impact of halting activities at this plant would be €185m, though it doesn’t expect this outcome to occur.


Silicon wafer maker Siltronic (-7.9%) reported an increase in sales and earnings for 2018. However, the company has seen a slow start to 2019 and wafer sales in the first half of the new year are expected to be lower than the second half of 2018, as are EBITDA (earnings before interest, taxes, depreciation and amortisation) margins. 


We began phasing in the changes from our annual review of companies’ reports and accounts. As a result of this year’s review, we have exited positions in: Covestro, Ence Energia y Celulosa, Natixis, Partners Group Holdings, Peugeot and Software AG. We bought the following stocks: ASML Holdings, Coloplast, Kering, Neste and Novo Nordisk.


Positive contributors to performance included:

Swedish Match (+11.1%), SimCorp (+10.6%) and Elisa (+9.7%).


Negative contributors to performance included:

Ence Energia y Celulosa (-20.3%), Dassault Aviation (-10.6%) and Scandic Hotels Group (-9.5%).


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 31.03.2019, 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 31.03.2019, 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.

Wednesday, April 17, 2019, 1:57 PM