Liontrust GF European Strategic Equity Fund

December 2019 review

The Fund’s A4 share class returned 4.8%* in euro terms in December, compared with the 2.1% return from the MSCI Europe Index and 0.9% return from the HFRX Equity Hedge EUR Index.

 

US-China trade negotiations remained the market’s primary focus as the pair edged closer towards a trade agreement. A “phase one” deal, which would see both countries pare back existing tariffs, has been touted for some time but significant strides were made in December. In the days leading up to December 15, the scheduled date for additional US tariffs, Trump said that a deal was “very close” and officials from China also conveyed optimism. The US eventually scrapped the planned tariffs on US$156bn worth of goods and said a truce is expected to be signed in January.

 

Elsewhere, Christine Lagarde took charge of her first European Central Bank monetary policy meeting, in which the bank maintained policy as expected. Of more interest was Lagarde’s press conference as investors looked for clues over the direction the new president will take for ECB policy. When questioned about whether she is a hawk or a dove, Lagarde remarked that she considers herself as an owl. She also revealed plans for a strategic review of the ECB’s monetary policy.

 

It became increasingly likely that the early part of Lagarde’s presidency would overlap with the UK’s exit of the European Union after the Conservative Party won a majority in the UK’s general election. The result gave Boris Johnson a mandate to pass his Brexit deal through parliament and execute the divorce. Initially, the pound rose sharply higher on the perceived clarity of direction, but soon gave up these gains as the market evaluated the economic consequences of Johnson’s Brexit plan.

 

The sector split on the MSCI Europe showed that aside from communication services (-1.7%), every sector ended higher, with the best performers utilities (+3.8%), financials (+3.6%) and materials (+3.3%).

 

The Fund ended December with a net exposure of 77%. December’s outperformance was once again driven by the long book, which significantly outstripped the market return. The short book slightly detracted, but the Fund was still able to outperform the MSCI Europe and HFRX Equity Hedge indices.

 

A number of the best long book performers participated in the global equity rise without releasing any material newsflow. Among them were UK-listed, domestic focused holdings, such as housebuilder Vistry Group (+14.9%) (formerly Bovis Homes Group) and brick maker Forterra (+19.4%), which bounced following the general election result.

 

Cruise operator Carnival (+6.9%) issued fourth quarter results which exceeded guidance. Net revenue yields decreased 1.8% in the quarter when measured at constant currency, slightly better than the company’s guidance of a 2%-3% decline. Full year adjusted net income remained at record levels of US$3.0bn, while adjusted earnings per share rose to US$4.40 from US$4.26 in 2018.

 

Gucci owner Kering (+7.0%) was reported to have held exploratory talks with Italian luxury skiwear company, and fellow long book holding, Moncler (+0.8%) about a potential acquisition. This follows further consolidation in the luxury fashion industry with LVMH’s recent acquisition of Tiffany & Co.

 

Given the broad-based rise in global equity markets, the Fund’s largest detractors were mostly in the short book. One was a pharmaceutical stock which rallied on successful early-stage study data in its hereditary transthyretin amyloidosis treatment. Another stock to weigh on the short book was a nutraceutical company which received approval from the Australian Therapeutic Goods Administration for its patented nicotinamide riboside chloride for use in listed complementary medicines.

 

Performance since launch* (%)

LESEF December 2019 Performance


Discrete monthly returns (A4 share class)*

1yr since 25/04/14
Fund 23.2% 41.1%
MSCI Europe 26.1% 43.9%
2019
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 7.6% 1.3% 3.0% -1.6% -3.1% 3.1% -1.6% -0.8% 4.8% 1.9% 2.1% 4.8%
MSCI Europe 6.2% 4.2% 2.0% 3.8% -4.9% 4.4% 0.3% -1.4% 3.8% 0.9% 2.7% 2.1%
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% 1.8% -4.2% -6.3% 1.5%
MSCI Europe 1.6% -3.9% -2.0% 4.6% 0.1% -0.7% 3.1% -2.3% 0.5% -5.3% -0.9% -5.5%
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%


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

 

 

Dec-19

Dec-18

Dec-17

Dec-16

Dec-15

Liontrust GF European Strategic Equity
A4 Acc EUR

23.2

-7.1

4.2

4.8

6.1

IA Targeted Absolute Return

10.6

-3.9

-0.6

-12.7

7.8


*Source: Financial Express, as at 31.12.2019, total return (income reinvested and net of fees). Non fund-related return data sourced from Bloomberg.

 

**Source: Financial Express, as at 31.12.2019, 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. 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.

Tuesday, January 14, 2020, 5:12 PM