Liontrust GF European Strategic Equity Fund

February 2018 review

The Fund’s A4 share class returned 1.1%* in euro terms in February (A3 share class 1.2%), compared with the -3.9% return from the MSCI Europe Index and the -1.7% return of the HFRX Equity Hedge EUR Index.

 

Net exposure at month end was c.62%. Despite substantial losses for European equity markets, the Fund’s long book posted a positive return, as companies with robust cash flows proved to be resilient to the downturn. As expected in a sell-off, the short book made a strong contribution to returns.

 

The market weakness at the beginning of the month was a continuation of the events seen at the tail end of January. Sovereign bonds were sold as investors considered an improving outlook for the world economy and the likelihood of tighter monetary conditions. This was intensified by better-than-expected US labour market data in February which showed wages growing ahead of consensus estimates fuelling higher inflation expectations.

 

In the UK, the Bank of England guided to a faster pace of interest rates increases as inflation creeps higher. The market now attributes c.70% probability of another 25 basis point rise in May (following the November 2017 rate increase which was the Bank’s first in over a decade). This is up from around 44% at the beginning of the month.

 

Negative sentiment fed into equity markets, which saw sharp declines as investors repriced their inflation and interest rate expectations. All sectors in the MSCI Europe Index ended lower. In euro terms, the worst performing sectors were real estate (-6.3%), consumer staples (-5.8%) and telecoms (-5.1%), while IT (-0.7%) was the best.  

 

The Fund, however, was mostly able to avoid this weakness. As has been the case in recent months, the main source of positive attribution for the Fund’s long book was its basic material holdings: Evraz (+13.6%), Ferrexpo (+5.9%) and Anglo American (+3.0%) – these were supported by elevated commodity prices.  

 

Elsewhere, Nordic construction group Peab (+9.5%) saw its share price rise following an upbeat fourth quarter update. Group net sales increased 7.2% to SEK14.6bn, with growth from every business area, helping to beat the consensus estimate of SEK14.2bn. Fourth quarter pre-tax profit also beat the market forecast coming in at SEK814m versus SEK781m. Oriflame (+8.4%) was another company to produce impressive fourth quarter results. The Swedish cosmetic company reported earnings before interest, taxes, depreciation and amortisation of €63.5m, ahead of consensus at €54.6m.  

 

Hexpol (-12.8%) was the main detractor from the long book. The polymers group delivered a 6% annual increase in fourth quarter sales but analysts were concerned about operating margins, which declined to 16.0% from 17.6%. There were also worries about the company’s ability to continue paying special dividends and pursue merger and acquisition opportunities. 

 

In the short book, a US semiconductor company was a positive contributor after it provided a trading update for the first quarter of its financial year, which came in below analyst expectations. The company attributed the tough quarter to political uncertainties in China.


Performance since launch* (%)

Liontrust GF European Strategic Equity Fund February 2018 review - Performance since launch

 

Discrete monthly returns*

1yr since 25/04/14
Fund† 2.5% 25.5%
MSCI Europe 5.0% 24.7%

 

2018
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund† 0.7% 1.1%
MSCI Europe 1.6% -3.9%
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 28.02.2018, 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.

Thursday, March 8, 2018, 10:59 AM