Liontrust GF European Smaller Companies Fund

January 2020 review

The Fund’s A5 share class returned -1.7%* in euro terms in January. This Fund’s target benchmark, the MSCI Europe Small Cap Index, returned -1.7%.

 

Despite US-Iran tensions triggered by an airstrike which killed Qasem Soleimani, global equity markets began 2020 on the front foot with US indices pushing to new all-time highs. Investor sentiment was buoyed by the mid-month signing of a ‘phase one’ trade deal between the US and China. As expected, the deal avoided any additional tariffs being levied, in return for some commitments on Chinese purchase of US goods and stricter intellectual property protection.

 

In the second half of the month markets reversed, primarily due to growing concern over an outbreak of coronavirus in the Wuhan district of China. By the end of the month, the official death toll had topped 170 and cases had been confirmed outside of China, leading the World Health Organisation to declare an international public health emergency.

 

The global growth outlook had already been clouded by downgrades to forecasts from both the World Bank and IMF so investors began to fret over the economic impact of travel restrictions and other measures to tackle the outbreak.

 

Growth concerns were very apparent through a significant defensive tilt to market returns at the start of the year. The MSCI Europe Index saw a very strong showing from the utilities sector, up 9.0%, while healthcare (+2.0%) and consumer staples (+0.9%) were also solidly in positive territory for the month.

 

Commodity prices reacted swiftly to reflect concerns that Chinese demand would be affected by the coronavirus outbreak. The energy sector dropped 8.3% and the materials sector lost 5.2%. Other cyclical areas of the market such as consumer discretionary (-5.9%) and finance (-3.0%) also fell back. 

 

Last month, the Fund’s allocation to the energy sector was a source of positive attribution but with Brent crude dropping 12% the exposure was a drag on the Fund in January. BW Offshore (-25.6%) and Tethys Oil (-6.8%) both suffered heavy falls. The Fund’s third sector holding, Gaztransport et Technigaz (+7.1%), was able to post a gain, however. The specialist in liquified natural gas (LNG) containers for shipping and storage announced new orders from Hyundai Heavy Industries and Hyundai Samho Heavy Industries to kit out eight vessels.

 

Evraz (-12.0%) was another portfolio holding to be hit by tumbling commodities as steel prices fell by more than 10%.

 

Vistry Group (+6.4%), formerly Bovis Homes, released a trading update indicating that 2019 profits would be slightly ahead of market consensus. Property completions rose 3% to 3,867 and average selling prices rose 2% to £279k over the year. The annual price rise was constrained by Brexit and general election uncertainty that knocked c.1-2% off prices in the second half of the year. Vistry was able to offset the price pressure with build cost savings that ensured operating margins expanded.

 

Following a deterioration in their cash flow scores, positions in Construcciones y Auxiliar de Ferrocarriles, CIE Automotive and Moneysupermarket.com were sold.

Positive contributors to performance included:

Cembra Money Bank (+8.3%), Fagron (+8.1%) and Gaztransport et Technigaz (+7.1%).

 

Negative contributors to performance included:

BW Offshore (-25.5%), Evraz (-12.0%) and Knowit (-9.2%).

 

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

 

 

Dec-19

Dec-18

Liontrust GF European Smaller Companies A5 Acc EUR

35.5

-20.1

MSCI Europe Small Cap Index

31.4

-15.9

 

*Source: Financial Express, as at 31.01.20, total return (net of fees and income reinvested). Non fund-related return data sourced from Bloomberg.

 

**Source: Financial Express, as at 31.12.19, 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. 

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.

Tuesday, February 11, 2020, 2:17 PM