Liontrust GF European Strategic Equity Fund

April 2018 review

The Fund’s A4 share class returned 1.5%* in euro terms in April (A3 share class 1.5%), compared with the 4.6% return from the MSCI Europe Index and the -0.8% return of the HFRX Equity Hedge EUR Index.

Net exposure at month end reduced further to c.48%, reflecting a larger short book due to what we identified to be an uncertain market backdrop. In April, the short book weighed on performance following a rebound in European equities and a takeover offer for one of its positions. The long book moved broadly in line with the wider market.    

After a poor start to the year, European equities registered their first positive month since January. This followed seemingly encouraging developments in the trade tensions between the US and China which had plagued the market in March. While China unveiled retaliatory tariffs of up to 25% on certain US imported goods following on from Trump’s announcements of Chinese import levies in March, there was more optimism that the two nations would avoid a trade war. 

Another source for the market’s gains was the rise in the oil price. North Sea benchmark Brent oil rose to US$75/barrel for the first time since late 2014 with Opec supply cuts continuing to have their intended impact of reducing global inventories and raising prices. Increasing geopolitical concerns also contributed to oil’s latest leg higher, with Trump signalling that he wants to withdraw the US from the Iran nuclear deal.

The rise in oil prices was reflected in the sector breakdown in the MSCI Europe Index where energy (+12.7% in euro terms) was by far and away the largest contributor to the index’s performance. The Fund’s long book participated in the energy rally with strong returns from Hunting (+19.0%), Total (+13.4%) and Tethys Oil (+13.2%). Additionally, Hunting released a trading update noting that revenue in the first three months of 2018 had been similar to the previous quarter. It added that strong cash generation allowed it to maintain a net cash position of US$3.6m at quarter end despite increases in working capital outflows.

Other strong performers from the long book included paper and packaging company Stora Enso (+10.1%), which reported robust first quarter results. Operational earnings before interest and taxes (EBIT) came in at €369m, which was ahead of the company’s own guidance and 72% higher than the same time last year. The improvement was down to favourable prices and higher volumes in the Consumer Board and Packaging Solutions divisions. 

Sberbank (-17.4%) was one of the main detractors from the long book amid wider weakness in Russian equities and the ruble. This was due to fresh sanctions by the US against Russia after Trump criticised Russia for siding with Bashar al-Assad following an alleged chemical attack in Syria. Nokian Renkaat (-5.6%), meanwhile, saw its shares ease after the resignation of its CFO, who had worked for the company for 20 years. 

The short book suffered in the rising market. One of the main detractors to performance was a fibre optic infrastructure company, which accepted a takeover offer at a 93% premium to its share price. Another detractor was an online fashion company which revealed strong full-year results. Revenue almost doubled year-on-year and gross profit rose 90%.

Performance since launch* (%)

Liontrust GF European Strategic Equity Performance

Discrete monthly returns*

1yr since 25/04/14
Fund 0.4% 25.2%
MSCI Europe 2.4% 27.8%
2018
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund** 0.7% 1.1% -1.7% 1.5%
MSCI Europe 1.6% -3.9% -2.0% 4.6%
2017
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 1.5% 2.0% 0.5% 1.4% -2.1% -2.0% -0.2% 1.6% 0.8% 1.1% -3.3% 3.0%
MSCI Europe -0.4% 2.9% 3.3% 1.7% 1.5% -2.5% -0.4% -0.8% 3.9% 2.0% -2.1% 0.8%
2016
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund -0.6% -0.2% -0.8% -0.7% 0.9% 2.3% 1.1% -1.5% 2.7% 2.7% -2.2% 1.2%
MSCI Europe -6.2% -2.2% 1.3% 1.9% 2.3% -4.3% 3.5% 0.7% 0.0% -0.8% 1.1% 5.8%
2015
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 1.7% 2.4% 1.5% -1.6% 1.3% -1.3% 3.9% -1.6% 2.2% -3.4% 0.8% 0.2%
MSCI Europe 7.2% 6.9% 1.7% 0.0% 1.4% -4.6% 4.0% -8.4% -4.3% 8.3% 2.7% -5.3%
2014 (subsequent to April's change to fund name and objective)
May Jun Jul Aug Sep Oct Nov Dec
Fund 0.2% 0.0% 1.2% -0.2% -0.5% 1.9% 2.4% 0.9%
MSCI Europe 2.5% -0.4% -1.5% 2.0% 0.4% -1.8% 3.2% -1.4%
**A4 share class

 

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

 

 

Mar-18

Mar-17

Mar-16

Liontrust GF European Strategic Equity A4 Acc EUR

0.3

10.7

-1.1

 

Discrete data is not available for five full 12 month periods due to the launch date of the portfolio.

 

*Source: Financial Express, as at 30.04.2018, total return (income reinvested and net of fees).

 

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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.

Investment in the Fund involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. 

Disclaimer

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, May 9, 2018, 11:33 AM