Liontrust GF European Smaller Companies Fund

March 2018 review

The Fund’s A5 share class returned -0.8%* in euro terms in March (A4 share class -0.9%). This compares with the -1.7% return from the MSCI Europe Small Cap Index.


European stocks took another leg lower in March, this time due to growing concerns of a trade war. US President Donald Trump announced a 25% tariff on steel imports and a 10% tariff on aluminium imports. This raised the expectation of retaliation from other major powers and Trump’s hint that some trading allies will be temporarily spared from the tariffs was not enough to reverse market sentiment. In addition, Trump announced a 25% tariff on up to US$60bn in annual imports from China.


Elsewhere, global monetary policy continued to tighten. New US Federal Reserve Chair Jerome Powell oversaw the central bank’s first interest rate increase of 2018. Though the Federal Open Market Committee’s dot-plot of future interest rate estimates showed no change to the three projected hikes in 2018, its rate expectations for 2019 were upgraded. The European Central Bank dropped wording about expanding its bond-buying programme from its policy statement, indicating another step towards curbing its quantitative easing scheme.


In terms of sector performances, having underperformed in recent months, utilities (+4.8%), real estate (+3.4%) and consumer staples (+0.4%) were the biggest gainers in the MSCI Europe Index in euro terms. The reverse was true for the fallers, with financials (-5.6%), materials (-4.6%) and IT (-3.9%) having had strong performances prior to March.


The materials sector was negatively impacted by Trump’s tariffs, with base commodity prices falling. Iron ore producer Ferrexpo (-19.6%) was one of the Fund’s holdings to suffer from this. Its share price decline came despite strong full-year earnings, in which it reported a doubling in profit, helped by an increase in pellet prices. The company was bullish in its outlook for the iron ore market, citing rationalisation of Chinese steel capacity. However, gold miner Centamin (+9.6%) performed better as the price of gold rose amid escalating trade war concerns. 


Deutsche Pfandbriefbank (-10.7%) reported a 21% rise in pre-tax profit in 2017 to €204m, driven by net interest and commission income. However, management guided pre-tax profit for 2018 to be between €150m-€170m, reflecting lower aggregate net interest and commission income and costs in relation to its real estate finance portfolio. 


Oil services company Hunting (+11.5%) was among the gainers after it revealed that it swung to an underlying profit in 2017. It stated that the performance was supported by the Hunting Titan product line, which benefited from increased onshore drilling activity in North America. The group was confident that oil prices would remain above US$60/barrel and this will stimulate further offshore drilling.


In keeping with the Cashflow Solution investment process, we began our annual review of companies’ report and accounts. In upcoming months we will implement changes to the Fund holdings in line with our findings from the review.                              



Positive contributors to performance included:

Hunting (+11.5%), (+11.2%) and SimCorp (+11.2%).


Negative contributors to performance included:

Ferrexpo (-19.6%), Scandic Hotels Group (-12.8%) and Deutsche Pfandbriefbank (-10.7%).



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 31.03.2018, 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. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

The portfolio is invested in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in the Fund involves a foreign currency and may be subject to fluctuations in value due to movements in exchange rates. 


This content 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy.  It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. 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, April 18, 2018, 11:17 AM