Liontrust European Opportunities Fund

Q1 2021 review

The Liontrust European Opportunities Fund returned 3.9% over the first quarter of the year, versus the MSCI Europe ex UK Index and IA Europe ex UK sector (both comparator benchmarks) which both returned 2.5%*.

European equities continued to rally during the first quarter of 2021. The global backdrop is balanced between the positives of an accelerating vaccine rollout in many parts of the world, President Biden signing into law the $1.9tn stimulus package and beginning work on an infrastructure plan, offset by setbacks with vaccinations in Europe and a third wave seeing new restrictions put in place. The scale of US stimulus has helped spur commodities higher with oil also supported by OPEC+ prolonging production cuts and delaying the return of spare capacity to the market. At the same time, it has fuelled concerns about the potential for higher inflation with the yield curve steepening and the US 10 year yield reaching levels not seen since late 2019 before the pandemic hit. European markets returned 2.5% for the quarter, led by more cyclical sectors with banks, travel and leisure, and autos posting the strongest returns while rate sensitive sectors such as utilities, healthcare and real estate all saw declines.

The Liontrust European Opportunities Fund returned 3.9% during the quarter with key positive contributions coming from the financials and consumer discretionary sectors. From a stock specific viewpoint, the outperformance of the Fund versus its comparator benchmarks was led by Volkswagen, ING and Yara International. Battered by the “Diesel-gate” scandal, Volkswagen had no alternative but to reposition its strategy to align with all stakeholders. Immediately, the company restructured its organisation to encourage innovation and reallocated significant capital from traditional internal combustion engine technology development to EV technology. The size of the pivot is staggering and is highlighted by the $42 billion investment the company is making in the technology over five years. On the other side of the ledger, the detractors to overall gains in the quarter were led by Vestas Wind Systems, Alfen and Adidas.

The expectation is that 2021 will be a year of rapid recovery and that life will have more or less returned to normal by the end of the year. Although the prevailing view is that 2021 will bring us back to normality, some developments seen in 2020 will persist. Distinguishing between cyclical and structural changes is important in understanding the outlook for 2021 and beyond.

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

 

Mar-21

Mar-20

Mar-19

Mar-18

Mar-17

Liontrust European Opportunities C Acc GBP

48.3%

-22.6%

-16.3%

6.9%

50.4%

MSCI Europe ex UK

33.5%

-8.3%

2.2%

3.0%

27.2%

IA Europe Excluding UK

39.6%

-9.4%

-1.2%

5.6%

23.7%

Quartile

1

4

4

2

1

 

*Source: FE Analytics as at 31.03.21

 

**Source: FE Analytics as at 31.03.21. Quartiles generated on 13.04.21

 

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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.

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.

Thursday, April 22, 2021, 3:07 PM