Liontrust GF European Strategic Equity Fund

February 2019 review

The Fund’s A4 share class returned 1.3%* in euro terms in February (A3 share class 1.3%), compared with the 4.2% return from the MSCI Europe Index and 1.1% return from the HFRX Equity Hedge EUR Index.


European equity markets extended January’s strong start to the year, adding another 4.2% to take the year-to-date return into double-digits in percentage terms (+10.6%).


The Fund’s low net exposure was maintained, finishing the month at 33%. With stocks in both the long book and short book producing aggregate returns that were broadly in-line with the market’s performance, the Fund’s participation in February’s gains was proportional to its net exposure. We continue to believe a low net exposure is appropriate given the signals from our investment process, which suggest equity markets are yet to break out from our classification of a downtrend and valuations remain elevated.


The market’s rise was supported by the ongoing easing of trade tensions between the US and China, which included speculation that the increase in tariffs scheduled for 1 March would be suspended for another 60 days.


As well as de-escalation of trade worries, the other factor providing market momentum recently has been key central banks’ softening of rhetoric on monetary tightening. Minutes from January’s meeting of the US Federal Reserve’s Open Market Committee confirmed that it is considering a pause to Quantitative Tightening later in 2019. Comments regarding the path of interest rates seemed to straddle both sides of the fence – some members noting that only higher inflation would necessitate rate rises, with others instead indicating that rate hikes would be appropriate in the economy progressed as expected during the year. Either way, it did not give strong backing to the Fed’s prior ‘dot plot’ for two rate rises in 2019.


While interest ahead of Trump’s Vietnam summit with North Korean President Kim was muted – especially when compared with last year’s meetings between the pair – some late-month volatility was triggered by the abrupt termination of talks which had floundered on the second day. The latest in a seemingly interminable series of Brexit developments saw Theresa May agree to votes on ‘no deal’ and an extension to the 29 March exit date if her revised deal fails to win support in an earlier vote.


Gains on European markets were fairly broad-based: industrials (+5.7%), finance (+5.2%) and materials (+5.2%) were among those sectors to marginally outperform the market average. Real estate (-4.0%) and utilities (-0.4%) were the only real outliers.


Evraz (+15.3%) was one of the long book’s strongest performers in February, after releasing 2018 results which showed an almost 50% rise in free cash flow to US$1.94bn, with much of the gain coming as a result of cost-cutting initiatives. The company also benefitted from what it describes as favourable market conditions which saw an upswing in prices for vanadium and steel products. This environment also boosted 2018 results for Reliance Steel & Aluminium (+9.7%), another long book holding. It recorded 19% growth in net sales to US$9.72bn, with free cash flow rising 67% to US664m. Average selling prices in Q4 were 20% higher compared with a year earlier.


Asset management software provider Simcorp (+14.8%) finished the year with strong Q4 sales, up 13% to €129m, while order intake of €61 represented a 23% year-on-year rise. For 2019 it expects revenue growth of between 8% and 13%.  Ence Energia y Celulosa (-6.6%) was one of the softer long book holdings. The paper and pulp manufacturer’s 2018 net income of 129m, although up 40% on 2017, was slightly below consensus expectations.


Due to an environment of broad-based gains for European equities, the majority of short book positions made negative contributions to Fund performance over the month. There were, however, a couple of notable positives in the short book. One of these was a UK provider of procurement software that released a profit warning on the last day of the month, citing a deterioration in retention and pipeline in US and European markets. 


Another UK software provider – this time to the leisure, entertainment and hospitality industries – also saw its shares fall heavily on a trading update, which suggested full year results would only be ‘broadly’ in-line with investor expectations and also announced a review of the company’s investment priorities.


Performance since launch* (%)

LESEF February 2019 Performance 


Discrete monthly returns (A4 share class)*

1yr since 25/04/14
Fund -0.6% 24.8%
MSCI Europe 1.3% 26.2%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 7.6% 1.3%
MSCI Europe 6.2% 4.2%
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%
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%
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%
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:







Liontrust GF European Strategic Equity A4 Acc EUR






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


*Source: Financial Express, as at 28.02.2019, total return (income reinvested and net of fees). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 31.12.2018, 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. 




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.

Friday, March 8, 2019, 10:54 AM