Liontrust GF European Strategic Equity Fund

December 2017 review

The Fund’s A3 share class returned 3.0%* in euro terms in December (A4 share class 3.0%), compared with the 0.8% return from the MSCI Europe Index and the 0.8% return of the HFRX Equity Hedge EUR Index.

Net exposure at month end was c.62%. The Fund’s performance was driven by strong long book returns, which significantly outpaced the MSCI Europe Index and more than offset a small negative return from the short book.


Political developments once again captured investors’ interest in December. After months of negotiation, UK and European delegates settled on a Brexit divorce bill of €40bn-€60bn. This agreement was the main hurdle for the parties to begin trade talks, which are expected to start in 2018. In the US, equities rallied as Donald Trump won his first major legislative victory after his tax reform was narrowly passed through the US Senate and the House of Representatives.


Away from politics, the US Federal Reserve raised interest rates once again, taking its target to between 1.25% and 1.5%, in line with market expectations. Median forecasts from members of the Federal Open Market Committee indicated that they expect interest rates to rise three times in 2018, which would match the number of hikes seen in 2017.


Commodity prices inflated as the year came to a close. The price of copper reached its highest level in almost four years after data from China, the world’s biggest consumer of the metal, showed imports of refined copper increased 19% in November. The Fund’s long book holdings in the mining sector benefited from this move, with Ferrexpo (+15.6%), Anglo American (+12.9%) and BHP Billiton (+12.8%) all among the best performers. Oil prices continued to move higher as stockpiles of US crude showed a sharp fall, which helped lift the long book’s oil exposed stocks: Hunting (+10.7%), Fred Olsen Energy (+9.9%) and Tethys Oil (+6.5%).


Hunting shares also reacted positively to a trading update. This included comments from the company that earnings would likely be at the upper end of market forecasts reflecting the strong performance of the Hunting Titan business unit. Notably, cash generation was strong and management also commented that covenant suspensions and the restriction on dividends would be lifted.


In the MSCI Europe Index, the materials sector (+4.0%) was the best performer in euro terms, followed by real estate (+3.7%) and energy (+2.3%). The utility sector (-4.1%) was by far and away the largest faller, while IT (-0.7%) and telecoms (-0.1%) also recording declines.


There was a little in the way of individual stock news within the Fund’s long book, but it benefited from having no exposure to the underperforming utilities sector.


In the short book a US e-commerce service provider detracted from performance following an investor roadshow and positive commentary from brokers regarding potential revenue and cost savings initiatives. A further detractor from performance in the short book came from a Swiss based retailer. The company announced that it would benefit from additional distributions through its holding in Picard.


A contributor to the short book was a UK-based information management service provider, which cut its earnings estimate for its financial year 2017 results after deciding that some revenue items should not be considered in its results.  


Performance since launch* (%)

Liontrust GF European Strategic Equity Fund December 2017 review - performance since launch

Discrete monthly returns*

1yr since 25/04/14
Fund† 4.2% 23.3%
MSCI Europe 10.2% 27.6%

 

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:

 

 

Dec-17

Dec-16

Dec-15

Liontrust GF European Strategic Equity A4 Acc EUR

4.2

4.8

6.1


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


*Source: Financial Express, as at 31.12.2017, total return (income reinvested and net of fees).

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 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. The Fund’s expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation.

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, January 10, 2018, 1:34 PM