Liontrust European Growth Fund

November 2020 review

The Fund returned 20.1%* in sterling terms in November. The MSCI Europe ex-UK index comparator benchmark returned 13.4% and the average return made by funds in the IA Europe ex-UK sector, also a comparator benchmark, was 14.1%.

 

Equity markets were in a state of euphoria in November, with the MSCI Europe ex-UK Index registering its largest sterling-terms gain since December 2008. The causes of the bullish sentiment were the announcements of Covid-19 vaccine candidates which showed 90%+ efficacy and provided hope of a route out of the pandemic.

 

While a number of European countries entered new lockdowns in early November, Pfizer and BioNTech released successful late-stage trial results for their vaccine candidate, sparking a surge in stock prices. This was followed the very next week by Moderna reporting similarly effective results and throughout the rest of the month other vaccine candidates from around the world also provided promising updates.

 

In markets, a strong rally ensued in those stocks which had been amongst the hardest hit during the Covid-19 crisis. The best performing sector was energy (+34%), clawing back some of the 48% year-to-date losses prior to November. Financials (+25%) and consumer discretionary (+16%) were the other big gainers. From a style perspective, the vaccine rally provided a major boost for value stocks, a trend we recently wrote about. The MSCI Europe ex-UK Value Index returned 20% during the month, outperforming both the market and the MSCI Europe ex-UK Growth Index’s 8.4% return.

 

The other major market development was Joe Biden’s victory in the US election. The contest was tighter than pre-election polls suggested and the touted “blue wave” failed to materialise, but ultimately the Democratic candidate won the required electoral college votes in a record turnout. Incumbent Donald Trump refused to concede and claimed, without evidence, wide-spread voter fraud. However, Trump’s accusations were largely ignored by investors who concentrated on the prospects of a Democrat leader in a post-pandemic world.

 

The US election result gave further impetus to value stocks, which was a boon to the Fund’s performance. Among the best performers in the portfolio were Deutsche Pfandbriefbank (+59%) and BNP Paribas (+43%). Whilst the main driver of the companies’ shares was the vaccine news, they also released third quarter results. Deutsche Pfandbriefbank recorded a 7.1% pre-tax profit increase in Q3, partly driven by a rise in net interest and commission income. The company expects a “solid” fourth quarter operating result but remained cautious about the effect of the Covid-19 pandemic to real estate markets and withheld guidance. However, management stated that the business was well positioned to handle this uncertainty given its conservative risk strategy, good capital base and comfortable liquidity position.

 

French bank BNP Paribas reported a 36% increase in Fixed Income, Currencies and Commodities trading revenue, coming in at €1.25bn and ahead of analyst estimates of €1.0bn. Equity and Prime Services also beat the market’s forecast, rising 21%, and total revenue was stable compared to the same period last year.

 

Bekaert’s (+40%) share price performance was more closely linked to its third quarter results, in which the steel wire transformation and coatings company flagged a turning point in most of its markets. Sales were up 24% quarter-on-quarter and down only 2% from the same time last year. Sales were helped by a significant rebound in demand in tyre markets. As a result of this improvement, the company forecasts full year earnings before interest and taxes to be broadly similar to the 2019 level.


Positive contributors to performance included:

Deutsche Pfandbriefbank (+59%), BNP Paribas (+43%) and Bekaert (+40%)

 

Negative contributors to performance included:

Coloplast (-0.7%) and Roche (-0.5%)

Discrete years' performance** (%), to previous quarter-end:

 

Sep-20

Sep-19

Sep-18

Sep-17

Sep-16

Liontrust European Growth I Inc

3.5

-3.0

6.8

16.7

30.0

MSCI Europe ex UK

-0.5

5.8

1.3

21.4

20.0

IA Europe Excluding UK

3.1

2.2

1.9

21.9

18.4

Quartile

2

4

1

4

1

 

*Source: Financial Express, as at 30.11.20, 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 30.09.20, 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. 

Disclaimer

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, December 18, 2020, 4:09 PM