Liontrust GF European Smaller Companies Fund

August 2018 review

The Fund’s A5 share class returned -0.6%* in euro terms in August (A4 share class -0.7%). This compares with the -0.5% return from the MSCI Europe Small Cap Index.


August’s stockmarket wobble was caused by a cocktail of concerns about emerging market economies and trade. The Turkish lira dived as Donald Trump tweeted that the US would be doubling its steel and aluminium tariffs on Turkey. This, combined with ongoing economic weakness highlighted by inflation running up to 15.9% in July, caused traders to sell out of the lira and other emerging market currencies. Worries about a crisis in Turkey weighed on European stocks, though measures announced by the Turkish central bank helped calm some nerves.


Meanwhile, the US-China trade war showed no signs of slowing, with Trump announcing an extra 25% tariffs on US$16bn worth of Chinese goods, to which the Chinese retaliated with similar measures. The US announced a bilateral trade deal with Mexico, though Canada, the third member of Nafta, was left in the cold.


Weakness on the MSCI Europe Index was broad-based, with no clear sector or style bias. In euro terms, telecoms (-7.1%) was the worst performing sector following by financials (-5.0%) and basic materials (-3.6%). The only sector to end higher was IT (+2.0%).


London-listed iron ore pellet producer Ferrexpo (-19.5%) was the Fund’s biggest detractor, following the release of disappointing first half results. The company revealed profit after tax for the six months ended 30 June fell to US$152m from US$216m in the same period last year due to lower iron ore prices and higher local cost inflation. Ferrexpo stated that while demand for iron ore is expected to remain strong through the rest of 2018 and 2019, cost inflation is also likely to persist as a result of higher energy prices and mining costs. Centamin’s (-12.9%) interim results featured a rise in revenue and profit as a result of higher realised gold prices. However, the precious metal miner’s share price fell over the course of August due to declining spot gold prices as a rising dollar weighed on commodity prices across the board.


Floating production storage and offloading (FBSO) vessels specialist BW Offshore (+32.3%) released interims which struck a more positive note with investors. Its second quarter results revealed earnings before interest, taxes, depreciation and amortisation of US$105m. Though this was a small decline from the previous year, it came in ahead of the consensus estimate of US$97m, due to strong revenue from the company’s ABO FPSO ship. SimCorp (+11.6%) also beat market expectations with its first half results. The portfolio management software company’s order intake was €9.2m more than the same period last year, beating consensus. The company maintained its full-year expectations of 10%-15% revenue growth and 24.5%-27.5% growth in earnings before interest and taxes.


Construction and civil engineering group Peab (+12.7%) reported a pretax profit of SEK673bn in the second quarter of 2018, coming in ahead of the market estimate of SEK610m, with all areas of the business contributing to the profit line. The company added that it has a solid order backlog though the housing markets in Sweden and Norway are expected to slow in 2018.


There were a number of changes to the Fund’s holdings in August. We sold out of positions in 888 Holdings, Greggs, Inficon Holding, Loomis and Oriflame Holding. Portuguese eucalyptus pulp producer Altri SGPS, UK-based self-storage company Big Yellow, Italian fashion company Brunello Cucinelli, X-ray imaging company Detection Technology and Nemetschek Group which provides software solutions to the building and construction industry were all added. 


Positive contributors to performance included:

BW Offshore (+32.3%), Kardex (+17.6%) and Nemetschek (+12.9%)


Negative contributors to performance included:

Ferrexpo (-19.5%), Siltronic (-16.3%) and Centamin (-12.9%)


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 31.08.2018, total return (net of fees and income reinvested).

**Source: Financial Express, as at 30.06.2018, 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. 
Monday, September 17, 2018, 1:45 PM