Liontrust GF European Smaller Companies Fund

April 2019 review

The Fund’s A5 share class returned 3.7%* in euro terms in April (A4 share class 3.6%). This compares with the 4.6% return from the MSCI Europe Small Cap Index.


The market’s ongoing march higher continued to stem from the US Federal Reserve’s switch to a more dovish rhetoric and ongoing trade negotiations between China and the US. The market was also enthused by strong economic data from the world’s two largest economies.


The US posted another month of robust jobs growth with a non-farm payrolls figure of 196,000 in March, rebounding strongly from the 33,000 job additions seen in the previous month and outstripping the consensus estimate of 180,000. Importantly for stocks, wage pressure seemed relatively muted which made it unlikely that the Fed would turn its eye back to rate increases.


China meanwhile maintained its pace of GDP growth in the first quarter of 2019, with a print of 6.4%. This was despite the trade tensions with the US and above the market’s estimate of 6.3%. Similarly in the US, GDP growth of 3.2% came in considerably ahead of the 2.3% Wall Street forecast. However, this figure was flattered by a build-up in inventories, which could reverse next quarter. 


European equities’ advance in April was this time led by cyclical sectors, a reversal of the trend seen in March. In euro terms, IT (+9.0%) was the best performing sector followed by financials (+7.9%) and industrials (+7.8%). The worst performing sectors were health care (-2.1%), real estate (-1.0%) and utilities (-0.2%).


The share price performance of French metal company Eramet (+25.8%) was one of the highlights for the Fund. The group signed an agreement with the government of New Caledonia to export 4 million tonnes of nickel ore per year. This agreement will reduce Eramet subsidiary Societe Le Nickel’s cash costs by US$0.60 per pound of nickel by 2021, keeping it on track for its target to reduce total cost by US$1.30/lb.


There was more positive news from marketing research company Ipsos (+15.8%), which announced that revenue in the first quarter of 2019 rose 15%, with organic growth of 2.4%. Organic growth was mainly driven by a strong performance in its Asia-Pacific region. The company maintained its full year forecasts of between 2%-4% organic growth.


Shares in iron ore pellet company Ferrexpo (-15.9%) fell sharply after it announced that Deloitte resigned as its auditor following potential links between Ferrexpo’s CEO and a Ukrainian charity under investigation for misuse of funds. Ferrexpo released a statement reassuring on its corporate governance procedures and noted that an independent review on the issue is ongoing.


WH Smith (-3.1%) was another poor performer following the release of its interim results. It was a familiar story for the books and stationery retailer, with its High Street division dragging down its better performing Travel division. Total revenue increased 8% year-on-year with Travel rising 18% and High Street declining 1%, though this is one of its best performance in recent years. Chief Executive Stephen Clarke noted that the company has made a good start to trading in the second half of the year, though cautioned about an uncertain economic and political environment.


We continued phasing in the changes from our annual review of companies’ reports and accounts towards the end of the first quarter. In April, we exited positions in Bossard, Detection Technology, Ferrexpo, Hunting, Siltronic and Soco International. We bought 4imprint Group, Belimo Holding and Knowit.


Positive contributors to performance included:

Eramet (+15.9%), Ipsos (+15.8%) and Deutsche Pfandbriefbank (+13.6%).


Negative contributors to performance included:

Ferrexpo (-15.9%), WH Smith (-3.1%) and International Personal Finance (-1.9%).


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





Liontrust GF European Smaller Companies A5 Acc EUR



MSCI Europe Small Cap Index




*Source: Financial Express, as at 30.04.2019, total return (net of fees and income reinvested). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 31.03.2019, total return (net of fees and income reinvested). Discrete data is not available for five full 12 month periods due to the launch date of the portfolio. Investment decisions should not be based on short-term performance.


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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, May 15, 2019, 3:36 PM