Liontrust GF European Smaller Companies Fund

September 2018 review

The Fund’s A5 share class returned 0.3%* in euro terms in September (A4 share class 0.2%). This compares with the -1.9% return from the MSCI Europe Small Cap Index.


Persistent concerns about trade wars and emerging markets meant that European equities started off on the back foot in September. Donald Trump continued to threaten China with tariffs of up to 25% on around US$200bn of Chinese imports, while China stood ready to retaliate. As has been the trend recently, this rhetoric was followed by action later in the month, though the US tariffs implemented on Chinese goods was only 10%. China’s reaction was to slap tariffs of between 5-10% on US$60bn of US imports.


Meanwhile, the further tightening of global monetary policy resulted in the ongoing weakness in emerging market currencies, as the dollar ploughed higher. The Turkish lira found some welcome relief, however, as its central bank hiked its one week repo rate to 24% from 17.75%, which was greater than the market’s expectations. There was also another round of monetary tightening by the US Federal Reserve, which raised rates once again in September to a range of 2.00% to 2.25%. The US central bank remains on course to raise rates again in December and signalled three more hikes in 2019.


There was a strong bounce back in European stocks in the second half of the month, driven mainly by the resource sectors. Energy (+5.8%) was the best performing sector in the MSCI Europe Index in euro terms, as oil prices rose to four year highs. This came after Saudi Arabia and other major oil producing nations decided against raising crude production. Stocks in the materials sector (+2.0%) were also strong gainers, as were financials (+2.0%). Real estate (-3.9%), IT (-2.8%) and consumer staples (-1.3%) fell.


The Fund’s mining stocks made a significant contribution to the Fund’s returns. Having been among the worst performers in August, Ferrexpo (+29.7%), ERAMET (+23.5%) and Evraz (+11.7%) rebounded strongly. The sector rallied on relief that tariffs imposed by the US and China were lower than expected. BW Offshore (+11.1%) was also a strong performer as it tracked oil prices higher.  


Silicon wafer supplier Siltronic (-15.5%) was the Fund’s biggest detractor as the company, alongside the rest of the sector, continued to feel the strain from the US-China trade dispute.


Positive contributors to performance included:

Ferrexpo (+29.7%), ERAMET (+23.5%) and Evraz (+11.7%)


Negative contributors to performance included:

Siltronic (-15.5%), Brunello Cucinelli (-11.6%) and Nemetschek (-10.9%)

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 30.09.2018, total return (net of fees and income reinvested).


**Source: Financial Express, as at 30.09.2018, 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.

Monday, October 22, 2018, 4:16 PM