Liontrust GF European Smaller Companies Fund

January 2019 review

The Fund’s A5 share class returned 11.4%* in euro terms in January (A4 share class 11.4%). This compares with the 9.0% return from the MSCI Europe Small Cap Index.


The positive start to 2019 was a stark contrast to the way 2018 ended for equity markets. Markets found some respite after key headwinds eased slightly in January. There was optimism that trade tensions between China and the US could recede as the pair continued talks amid a truce against further tariffs. Protectionist measures between the two superpowers have begun affecting the real economy with economic data from China in particular showing signs of a slowdown. This was mirrored in corporate news too, most notably with Apple warning of slowing iPhone revenue from China.


As is often the case in China, the central bank provided extra stimulus to calm investors. The People’s Bank of China announced that it would reduce the reserves that commercial banks are required to hold, which would free up around US$117bn in its banking system.  


The Federal Reserve, however, was the main focus for investors as the US central bank softened its rhetoric on its balance sheet normalisation and the pace of interest rate increases. Fed members stated that they will be patient with further adjustments to monetary policy as a result of building global economic and financial pressures and muted inflation. Increasingly tight monetary policy has suppressed the market in recent months and the Fed’s statement lifted this pressure for the time being.


The gains in European equities were broad based. The best performing sectors in the MSCI Europe were real estate (+10.7%), consumer discretionary (+9.4%) and materials (+8.7%), while communication services (-0.8%) was the only sector to end lower.


Ferrexpo (+36.7%) was the Fund’s biggest gainer. Following the tragic disaster at the Vale mine in southern Brazil, the price of iron ore rose due to the expected shock to supply. This in turn lifted share prices of mining companies.


WH Smith (+19.4%) shares rose on the back of its Christmas trading statement. In the 20 weeks to 19 January, total sales rose 6%, driven mainly by its Travel division which grew 16%, while like-for-like sales were flat. The market looked at these results in a positive light, particularly given the current difficulties facing UK high street retailers. WH Smith also stated that InMotion, the US travel retailer which WH Smith acquired in November, has shown strong sales momentum.


Brick maker Forterra (+21.8%) noted that it is likely to meet expectations for the full-year, underpinned by a healthy new build residential market in the UK. Brick volumes were ahead of 2017 levels and the company expects the market to continue its strength given the government’s commitment to new build housing projects. Bovis Homes Group (+21.2%) also issued a statement which reflected positively on the UK housing sector. The company anticipates a record year of profits in 2018, having delivered a total of 3,759 new homes which was 3% higher than the same time last year. Though the sector has been disrupted by Brexit, the housebuilder believes fundamentals remain strong, with government initiatives and attractive mortgage rates lending support.  


Positive contributors to performance included:

Ferrexpo (+36.7%), BW Offshore (+31.0%) and Ence Energia y Celulosa (+23.5%).


Negative contributors to performance included:

AG Barr (-1.6%), IPSOS (-1.3%), and Eramet (+0.8%).


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 31.01.2019, total return (net of fees and income reinvested). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 31.12.2018, 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.
Wednesday, February 13, 2019, 12:04 PM