Liontrust GF European Smaller Companies Fund

October 2019 review

The Fund’s A5 share class returned 2.1%* in euro terms in October. This compares with the 2.5% return from the MSCI Europe Small Cap Index.


Equity markets began the month on unstable footing as traders reacted to poor US private sector payrolls data and further weakening in global manufacturing indicators. This added to ongoing trade war and Brexit uncertainties and resulted in a global stockmarket slump.


During the rest of October, stocks gradually clawed back their losses. There were some tentative signs of progress in the US and China trade talks, with US trade representatives stating they are close to finalising some sections of the “phase one” deal. There have been many false dawns when it comes to thawing trade relations between the two superpowers so investors were limited in their enthusiasm.


Brexit developments also caught the market’s attention. PM Johnson struck a deal with the EU and although he failed to get it ratified by parliament and meet the 31 October deadline, he was successful in securing a December general election.


Brexit and trade news fed into the US Federal Reserve’s decision to signal no further immediate monetary easing measures following a third interest rate cut in its October meeting. Chair Jerome Powell said that chances of a no deal Brexit have materially declined and the potential of phase one agreement with China has meant that the principal risks to global growth have subdued.


Gains on the MSCI Europe Index had a cyclical tilt. Consumer discretionary (+3.5%), industrials (+3.4%) and financials (+2.0%) were among the best performers in euro terms. Consumer staples (-3.7%) and energy (-2.5%) were the biggest fallers.


The biggest gainers in the Fund were mostly UK-listed stocks, which received an additional boost from the strength of the pound. Judges Scientific (+14.3%) continued its share price rise following interim results in September showing strong growth.


Books and stationery seller WH Smith (+13.4%) announced the US$400m acquisition of US travel retailer Marshall Retail Group. The deal was partly funded by a £155m equity placing. WH Smith highlighted Marshall’s strength across high footfall airport, resort and tourist locations, adding that the acquisition will broadly double WH Smith’s International Travel business.


Meanwhile, self-storage company Big Yellow Group (+13.2%) saw its shares jump after it received planning permission for a new store in Hove, which will provide 55,000 square foot of net lendable area. Construction is due to start in Autumn of 2020 and expected to be ready for Spring 2022.


Evraz (-19.1%) was also looking to make significant investments. In a capital markets day, the steel maker said it is considering three major investment projects which could see capital expenditure increase by around US$1bn per annum, as it targets increased sales. Capex levels are expected to be US$850m for 2019.


Nordic construction company Peab (-7.4%) recorded a 5.9% decline in third quarter pre-tax profit to SKr706m, below the consensus estimate of SKr746m. Peab noted that signs of an economic downturn in Sweden became clearer in the third quarter and housing construction is expected to decline in 2019 and 2020. Finnish housing demand is also forecast to slow in 2020, though Norway’s demand is expected to remain stable.


Moneysupermarket Group (+6.6%) also published a third quarter statement. Revenue grew 4%, slowing from 7% in the same period last year. The performance was driven by a decline in its Money business, which the company said underperformed due to continuing challenges in product availability. The price comparison company added that the division is expected to weaken further in the fourth quarter.


Positive contributors to performance included:

Judges Scientific (+14.3%), WH Smith (+13.4%) and Big Yellow Group (+13.2%).


Negative contributors to performance included:

Evraz (-19.1%), Gaztransport & Technigaz (-10.1%) and Peab (-7.4%).

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 31.10.2019, total return (net of fees and income reinvested). Non fund-related return data sourced from Bloomberg.

**Source: Financial Express, as at 30.09.2019, 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.

Thursday, November 14, 2019, 4:04 PM