Liontrust GF European Strategic Equity Fund

December 2020 review

The Fund’s A4 share class returned 5.7%* in euro terms in December. The Fund’s comparator benchmarks, the MSCI Europe Index and HFRX Equity Hedge EUR Index, returned 2.4% and 3.4% respectively.

 

December showed no respite in newsflow during what was an extraordinary year. The EU and UK finally agreed on a trade deal, bringing an end to much of the significant uncertainty surrounding the situation as the Brexit transition period came to a close. The threat of a no deal exit had loomed large throughout the month, but an agreement which maintained tariff-free trade on most goods was eventually reached and swiftly ratified by officials on both sides. Markets reacted positively, with sterling ending the year at its highest level against the US dollar.

 

During the negotiations, the UK began rolling out its vaccination programme but cases of Covid-19 climbed significantly higher. The government confirmed the presence of a new, faster spreading strain of the virus. Plans for easing restrictions for Christmas were quickly scrapped for the worst hit areas, as hospitalisations approached similar levels to the April peak.

 

Despite this new threat, equity markets maintained gains for December, but for 2020 as a whole, the MSCI Europe Index fell 3.3% in euro terms. In December, the best performers were materials (+5.8%), IT (+5.4%) and consumer discretionary (+5.2%). The only sector to end in the red was health care (-0.2%).

 

The Fund’s outperformance of the MSCI Europe was down to a very strong long book performance, where its consumer discretionary holdings provided a significant contribution. This more than offset a poor short book performance, which, given the net market exposure of 66%, had a limited impact on overall Fund return.

 

The pick of the Fund’s consumer discretionary holdings were Moncler (+22%), Elior Group (+15%) and Vistry Group (+14%). Luxury apparel company Moncler announced an agreement to acquire Stone Island in a €1.15bn cash-and-share deal. The deal values Stone Island at 16.6 times its 2020 earnings before interest, tax, depreciation and amortisation.

 

In a short statement, UK housebuilder Vistry Group said its strong cash generation means that it expects to have a net debt position no greater than £40m at the end of 2020, with a possibility of a modest net cash position. Strong trading and low cancellations as well as good cash management have been the drivers of this improvement in outlook. French catering group Elior, meanwhile, saw its share price rise after a broker upgraded its revenue forecasts for the company.

 

Bank of Ireland Group (+25%) and BHP Group (+13%) both rose on the back of positive macroeconomic developments. The former saw its share price appreciate after data for October showed the fastest rise in Irish mortgage approvals since 2011. Mining giant BHP was boosted by a rally in iron ore futures as data showed robust Chinese steel production.

 

One of the few long book detractors was Danish facility services company ISS (-7.6%) after it announced a “refreshed strategy”. It said that an extensive review found flaws in the execution of its previous strategy and it has decided to divest from areas of its business representing DKr4bn. This is expected to generate DKr2bn in net proceeds over 2021-2022, but the company has suspended its dividend until the end of 2022.

 

A number of stocks in the short book recorded double-digit gains, which acted as a drag on overall Fund performance. Among them was a US furniture retailer, which reported results ahead of consensus estimates, with comparable sales up over 50%. Another stock was a UK-based video game service provider which announced three new acquisitions in December.

 

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

 

 

Dec-20

Dec-19

Dec-18

Dec-17

Dec-16

Liontrust GF European Strategic Equity
A4 Acc EUR

-10.0

23.2

-7.1

4.2

4.8

MSCI Europe

-3.3

26.0

-10.6

10.2

2.6

HFRX Equity Hedge EUR

2.9

8.5

-12.3

7.8

-1.7

 

*Source: Financial Express, as at 31.12.20, total return (income reinvested and net of fees). Non fund-related return data sourced from Bloomberg.

 

**Source: Financial Express, as at 31.12.20, 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.

Thursday, January 14, 2021, 4:05 PM