Liontrust European Growth Fund

October 2020 review

The Fund returned -4.1%* in sterling terms in October. The MSCI Europe ex-UK index comparator benchmark returned -5.8% and the average return made by funds in the IA Europe ex-UK sector, also a comparator benchmark, was -6.2%.


Global equity markets struggled in October, weighed down by resurgent Covid-19 fears and fading hope of a US fiscal stimulus package being announced ahead of November’s election. The month began in dramatic terms as Donald Trump confirmed he had tested positive for Covid-19. As he made a swift recovery, markets hoped that negotiations with Democrats regarding a new virus-relief stimulus package might receive fresh impetus, but no agreement was reached.


More broadly, the path of the pandemic caused growing concern in Western markets as evidence of a second wave of infections mounted. Many countries began reintroducing lockdown measures that had previously been relaxed. Estimates of the economic impact of Covid-19 continued to feed through; the IMF now expects a 4.4% global contraction in 2020, better than its June estimate of a 5.2% fall. One of the key factors in moderating the decline has been China’s recovery; it posted 4.9% year-on-year growth in Q3, taking its year-to-date growth into positive territory following Q1’s dramatic drop.


All sectors of the MSCI Europe ex-UK Index lost ground in sterling terms during October. Energy (-9.8%) was once again among the worst performers and has now lost 37% this year. IT (-12%) has been one of the sectors to cope best with the pandemic, remaining in positive territory year-to-date, but it was the worst hit in October as large constituent SAP lost over 30% on downgrades to its outlook.


With European markets falling heavily, the Fund could not avoid the weakness but was able to show some relative strength. Among the stock-specific highlights was Bank of Ireland (+32%), which issued Q3 results that were surprisingly robust. The company described trading conditions as generally improving compared with Q2, with a 30% increase in Irish mortgage completions and a doubling in bespoke mortgage completions for its UK business.


Danish jewellery retailer Pandora (+9.8%) raised full year sales guidance within its Q3 trading update, albeit still forecasting a significant fall. It now expects a 2020 sales fall of between 14% and 17%, compared with its previous forecast of 14% to 20%. It also updated operating margin guidance to the top end of its previous range: from 16% - 19% to 17.5% - 19%. A better-than-expected sales performance in Q3, with organic sales falling 5%, was driven by 89% year-on-year growth in online sales.


French media giant Publicis Groupe (+7.3%) also rose after recording a 5.6% organic sales decline in Q3, ahead of its estimate of a 10% market contraction in advertising spending and the 8% drop forecast by research analysts. While it is cautious on its prospects for Q4, it did note an encouraging sign in the form of positive year-to-date sales growth to its top 200 clients. It also stated that progress on its cost cutting measures should ensure that full-year operating margins are slightly ahead of the consensus analyst forecast of 14.3%.


The most prominent portfolio detractor was Elisa (-17%). It slid on Q3 results that appeared to give little cause for a pronounced sell-off. The Finnish telecoms operator grew revenue by 3m to €468m, but investors may have been disappointed in trends in its mobile service revenues, which fell 0.5% after a large fall in roaming revenue as a result of Covid-19 travel restrictions.


Atlas Copco (-7.9%) gave up some of last month’s M&A-fuelled gains. Q3 results released during the month were solid, showing an organic decline in revenues of only 2% year-on-year and a recovery from Q2 levels. While the Swedish industrial goods company acknowledges an uncertain economic growth outlook, it expects demand levels to be maintained in Q4.


Danish pharmaceutical company Novo Nordisk (-7.2%) raised its full-year sales and profit guidance early in October but went on to lose ground as its Q3 results disappointed against high expectations. The company stated that the Covid-19 impact on business has been lower than it anticipated, leading it to upgrade sales growth guidance from a 3% - 6% range to 5% - 8% and lift forecast operating profit growth from 2% - 5% to 5% - 8%. However, its Q3 operating profit of DKr12.8bn was a little below the DKr13.0bn consensus analyst forecast.


Shares in metals mining and smelting group Boliden (-8.3%) fell for much of October but rallied late in the month after reporting a 38% year-on-year improvement in Q3 adjusted operating profit to SKr2.3 billion, ahead of analyst forecasts of SKR2.1bn.


Positive contributors to performance included:

Bank of Ireland (+32%), Pandora (+9.8%) and Publicis Groupe (+7.3%).


Negative contributors to performance included:

Merlin Properties Socimi (-20%), Elisa (-17%), Amadeus IT Group (-14%).


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 31.10.20, 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.


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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.

Wednesday, November 11, 2020, 2:02 PM