Liontrust European Opportunities Fund

Q1 2020 review

The Liontrust European Opportunities Fund returned -28.4%* over the first quarter, versus the MSCI Europe ex UK Index and IA Europe ex UK sector respective gains of -17.5% and -19.0%.

The first quarter of 2020 has brought an end to the post-GFC bull market in developed market equities. The acute stage of the coronavirus panic and market selloff began on February 23rd, when Italy reported an outbreak in its northern regions. At this point it became clear that the virus was not a regional concern but a global pandemic. The ensuing collapse of the OPEC+ talks sent oil prices down to $30/bbl (-55% YTD) which put further pressure on global equities.

European equities had a difficult quarter, falling by 17.5%. Given the swift nature of the sell-off and sharp downgrades to economic growth and earnings estimates following the sudden stop in the global economy, it was more cyclical sectors that led the way down. Financials, energy and industrials were the worst performing sectors, with healthcare, consumer staples and utilities being more defensive. The market is naturally worried about earnings for banks, but it is worth noting the sector has considerably better levels of liquidity and capital than it did heading into the global financial crisis. Further declines in interest rates have not helped the outlook for earnings and with widespread dividend postponements, the return of capital to shareholders is likely pushed out to 2021. The energy sector fell by more than 50% along with the oil price but had already retraced nearly half of this fall by quarter end. It remains to be seen whether OPEC+ can coordinate cuts in an effort to put a floor under prices, but with the scale of demand declines it seems implausible the oil market can be balanced in the near future.

With the dislocations in valuations between cyclical and defensive sectors that we had witnessed prior to the coronavirus crisis, the portfolio was more cyclically positioned which proved painful during the sharp market drawdown. We don’t believe that now is an appropriate time to turn defensive, and instead are focused on the liquidity and balance sheet strength of our holdings to ensure they are well positioned to manage the current crisis and benefit from the subsequent recovery. We have seen unprecedented levels of monetary and fiscal stimulus put in place to provide a bridge to the post-crisis recovery, and importantly a clear message that more will be done if required. As cases peak in those countries impacted earliest by the coronavirus, such as Italy and Spain, we may not be too far away from a gradual relaxing of lockdown measures. Austria and Denmark are already looking to relax measures in April. There will be some permanent damage from the economic shock, but we expect much of Europe to return to a new normal over the coming months. It will be vital to track a second wave of infections as countries partially reopen, and to gauge how efficiently economies can function with social distancing and some restrictions still in place.

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







Liontrust European Opportunities C Acc GBP






MSCI Europe ex UK






IA Europe Excluding UK













*Source: FE Analytics as at 31.03.20


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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 Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.


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Thursday, April 23, 2020, 3:07 PM