Liontrust GF European Smaller Companies Fund

August 2019 review

The Fund’s A5 share class returned -1.2%* in euro terms in August (A4 share class -1.2%). This compares with the -1.7% return from the MSCI Europe Small Cap Index.


European stocks joined the global equity slump as US-China trade tensions weighed on sentiment once again. Trump announced at the beginning of the month that the US would impose a 10% tariff on US$300bn worth of Chinese imports on 1 September. The following day the Chinese renminbi fell to its lowest level against the US dollar since February 2008, resulting in accusations of currency manipulation from the US and fears that a currency war could add to trade woes.  Trump added fuel to this fire by continuing his attacks on the Federal Reserve for keeping the dollar too high.


As the month wore on, Trump stated that tariffs would be delayed on around US$155bn worth of consumer goods until December with the aim of reducing the impact on consumers ahead of Christmas. However, he later raised the tariff rate to 15% and warned US companies to exit the Chinese market. China stated that it will retaliate with “necessary countermeasures” and commented that the US had seriously violated the agreement struck by the two countries in the Osaka G20 meeting. 


As has been the case in previous episodes of US and China trade tensions, defensive assets benefitted. Gold is an obvious illustration of this, with the metal hitting its highest level for over six years. In the MSCI Europe Index, consumer staples (+3.4%), utilities (+3.3%) and health care (+3.0%) were the best performers in euro terms. Energy (-7.3%), financials (-5.4%) and IT (-4.2%) experienced the worst of the sell-off.


Steel maker and mining company Evraz (-18.6%) suffered as iron ore prices declined. The metal and other commodity prices came under pressure from the renewed US-China trade tensions and signs of a slowdown in the Chinese economy.


Danish drinks group Royal Unibrew (+16.9%) stated that EBIT (earnings before interest and taxes) for 2019 is now expected to be at the upper end of its Dkr1.44bn-Dkr1.47bn guidance after posting strong interims. The company recorded an 11% increase in EBIT in the first six months of 2019, with contributions from all its segments. Royal Unibrew has been increasing its focus on addressing new customer trends within areas such as “good for you”; low/no sugar beverages were among the top performing segments in the first half.


Ringkjoebing Landbobank’s (-11.5%) shares eased after its second quarter results came in below consensus estimates. Pre-tax profit nearly doubled year-on-year to Dkr297m, but that was still short of the analysts’ consensus estimate of Dkr308m. The Danish bank maintained full-year pre-tax guidance of Dkr900m-Dkr1.2bn and said it expects to record results at the top end of this range.


Results from Fagron (+8.7%) were better received. The group saw revenue increase 11% to €255m in the first half of the year, with organic growth of 7.2%. This rise was driven by a strong performance in its North American business, which saw a revenue increase of 38%. The company added that it is confident that it will continue to grow revenue in the second half of 2019. Belimo Holding (-13.6%) recorded a 13% increase in EBIT during the first half of 2019, with margins rising to 18.9% from 18.3%. However the company, which makes actuator valves for controlling heating, ventilation and air conditioning, said that EBIT margins are expected to trend lower in the second half of the year as a result of additional costs related to its growth strategy. It also warned that the ongoing trade dispute between the US and China could add a further drag on margins.


During August, we exited positions in AG Barr, Dassault Aviation, Eramet and ForFarmers.


Positive contributors to performance included:

Royal Unibrew (+16.9%), BW Offshore (+15.2%) and Big Yellow Group (+9.1%).


Negative contributors to performance included:

Evraz (-18.9%), Belimo Holding (-13.6%) and Eramet (-12.5%).


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 31.08.2019, total return (net of fees and income reinvested). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 03.07.2019, 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.

For a comprehensive list of common financial words and terms, see our glossary here.


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.

Tuesday, September 17, 2019, 2:47 PM