Liontrust GF European Strategic Equity Fund

August 2018 review

The Fund’s A4 share class returned -2.0%* in euro terms in August (A3 share class -1.9%), compared with the -2.3% return from the MSCI Europe Index and -0.5% return from the HFRX Equity Hedge EUR Index.

 

Net exposure at month end was c.38%. Though registering a decline, the long book delivered a more resilient return than the MSCI Europe Index. The short book, however, experienced a weak month despite a fall in European equities.

 

August’s stockmarket wobble was caused by a cocktail of concerns about emerging market economies and trade. The Turkish lira dived as Donald Trump tweeted that the US would be doubling its steel and aluminium tariffs on Turkey. This, combined with ongoing economic weakness highlighted by inflation running up to 15.9% in July, caused traders to sell out of the lira and other emerging market currencies. Worries about a crisis in Turkey weighed on European stocks, though measures announced by the Turkish central bank helped calm some nerves.

 

Meanwhile, the US-China trade war showed no signs of slowing, with Trump announcing an extra 25% tariffs on US$16bn worth of Chinese goods, to which the Chinese retaliated with similar measures. The US announced a bilateral deal with Mexico, though Canada, the third member of Nafta, was left in the cold.

 

Weakness on the MSCI Europe Index was broad-based, with no clear sector or style bias. In euro terms, telecoms (-7.1%) was the worst performing sector followed by financials (-5.0%) and basic materials (-3.6%). The only sector to end higher was IT (+2.0%).

 

London-listed iron ore pellet producer Ferrexpo (-19.5%) was the long book’s biggest detractor, following the release of disappointing first half results. The company revealed profit after tax for the six months ended 30 June fell to US$152m from US$216m in the same period last year due to lower iron ore prices and higher local cost inflation. Ferrexpo stated that while demand for iron ore is expected to remain strong through the rest of 2018 and 2019, cost inflation is also likely to persist as a result of higher energy prices and mining costs.

 

Ferrexpo’s larger peer Rio Tinto (-10.9%) also fell after underwhelming interims. It appeared that the multi-commodity miner’s 36% increase in pre-tax profit and 15% higher dividend was not enough to please the market. In addition, the basic materials sector came under pressure as trade war concerns triggered commodity price weakness.

 

Floating production storage and offloading (FBSO) vessels specialist BW Offshore (+32.3%) released interims which struck a more positive note with investors. Its second quarter results revealed an earnings before interest, taxes, depreciation and amortisation of US$105m. Though this was a small decline from the previous year, it came in ahead of the consensus estimate of US$97m, due to strong revenue from the company’s ABO FPSO ship. SimCorp (+11.6%) also beat market expectations with its first half results. The portfolio management software company’s order intake was €9.2m more than the same period last year, beating consensus. The company maintained its full-year expectations of 10%-15% revenue growth and 24.5%-27.5% growth in earnings before interest and taxes.

 

Testing, inspection and certification services providers Intertek Group (-13.0%) reported a 7.5% rise in profit before tax at constant currency rates in the first half of 2018, as operating margins improved to 16.8% from 16.3%. However, the margin uplift was not as high as analysts expected, while organic growth slowed from first four months of the year.


The biggest detractors to the short book performance were companies in the US, where the S&P 500 rallied to reach a new all-time high and entered its longest bull run in history. One stock is a music streaming company which reported better than expected results, with subscription revenue growing 67%. A US consumer goods distributor saw an increase in both revenue and profit in the second quarter of 2018 as a result of improved market share.

 

Performance since launch* (%)

Liontrust GF European Strategic Equity Fund August Performance

 

 

Discrete monthly returns*

 
1yr since 25/04/14
Fund** 1.7% 23.4%
MSCI Europe 4.9% 28.0%
2018
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund** 0.7% 1.1% -1.7% 1.5% 1.2% -2.6% 2.0% -2.0%
MSCI Europe 1.6% -3.9% -2.0% 4.6% 0.1% -0.7% 3.1% -2.3%
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:

 

 

Jun-18

Jun-17

Jun-16

Jun-15

Liontrust GF European Strategic Equity A4 Acc EUR

3.0

5.3

2.9

10.1

 

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

 

* Source: Financial Express, as at 31.08.2018, total return (income reinvested and net of fees).

 

**Source: Financial Express, as at 30.06.2018, total return (income reinvested and net of fees).

 

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.  
 
Disclaimer
 
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, September 17, 2018, 1:50 PM