Liontrust GF European Smaller Companies Fund

May 2020 review

The Fund’s A5 share class returned 6.0%* in euro terms in May. This Fund’s target benchmark, the MSCI Europe Small Cap Index, returned 5.2%.


Stocks in Europe continued to claw back lost ground as countries began tentatively reopening select parts of their economies. Lockdowns across the continent, and other areas of the world, were imposed to contain the spread of Covid-19 but have also strangled economic growth. The easing of lockdown measures and evidence of a suppression in coronavirus cases provided support to equities.


However, there are still a number of factors that will keep investors uneasy. Outside of the direct Covid-19 threat, US-China tensions are chief among them. Trump threatened economic measures against China and accused its government of mishandling the coronavirus outbreak. The US-China trade war had been one of the main drags to global growth in the past few years so a resumption of it while the world is battling coronavirus would be unwelcome.


Industrials (+6.7%) ended May as the best performing sector in the MSCI Europe Index, followed by IT (+6.2%) and materials (+5.9%), providing a slight cyclical bias to returns. The only sector to end lower was energy (-2.2%), despite oil prices recovering from their April lows.


The Fund’s outperformance was largely driven by strong returns made by its IT and communication services holdings. French market research company Ipsos (+24.2%) is a constituent of the latter. It reported that new orders have started coming in during May, as lockdowns began easing, and the run rate is now just below last year’s level. The company said that much of the new demand for its services have been directly related to Covid-19 research from both public and private institutions.


New guidance from investment software provider SimCorp (+17.2%) – an IT holding – was well received. The company expects 2020 revenue growth of between -5% and +5% but admitted there is still significant uncertainty in the market. Prior to the coronavirus outbreak, it had expected revenue growth of 5%-10%. Construction industry software company Nemetschek (+23.3%) continued to benefit from its Q1 statement at the end of April.


Pandora (+38.1%) was one of the best performers, with shares rebounding to reach mid-February levels. The Danish jewellery company issued a reassuring first quarter statement which explained that it has enough liquidity to sustain a scenario where all its physical stores remained closed for the rest of 2020. Pandora said that online sales were strong in April and it is gradually reopening physical stores, mainly in Germany. The group also announced that it agreed an additional DKr3bn loan facility and intends to sell 8m treasury shares.


William Hill (+13.0%) benefitted from the planned easing of lockdown measures. The Premier League and Championship arranged a date to restart the football season and the UK government indicated that professional sport could resume behind closed doors. In a trading statement, the bookmaker indicated a 57% decline in net revenue during the period 11 March-28 April. It said that sports betting declined sharply, though the fall was less than expected as customers moved to niche sports and emerging market football, which was still ongoing. 


Books and stationery retailer WH Smith (-18.1%) gave greater clarity on the impact of Covid-19 in its interim results. The group has experienced significantly less footfall as a result of lockdowns and travel bans, resulting in an 85% year-on-year decline in revenue during April, comprising a 91% decline in its Travel business and a 74% fall in the High Street division.


Bank of Ireland (-12.3%) reported a swing to an underlying pre-tax loss of €235m in Q1 after suffering from Covid-related market movements and impairment costs. The group revealed that it booked a €266m impairment charge, €250m of which was for a Covid-19 management overlay to reflect the deteriorating economic environment. Further impairments and loan losses are expected throughout the rest of 2020, while lower business activity could lead to 2020 lending volumes being 50-70% of 2019 volumes. Bank of Ireland also saw an additional €155m impact from adverse movements on valuations from the Covid-19 fallout.


Housebuilder Vistry Group (-8.7%) saw a share price decline despite reporting on resilient trading. Reservations, completions and cash management had all been better than it expected during the lockdown period. It said it has now restored over 70% of operations in its partnerships business and has continued to increase its pipeline which now stands at £827m. Sales offices within its housebuilding division have reopened for appointments and have seen 300 reservations net of cancelations during the lockdown period.


Positive contributors to performance included:

Pandora (+38.1%), Ipsos (+24.2%) and Nemetschek (+23.3%).


Negative contributors to performance included:

Forterra (-21.9%), WH Smith (-18.1%) and Bank of Ireland (-12.3%).


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


**Source: Financial Express, as at 31.03.20, 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.

Friday, June 12, 2020, 3:10 PM