Liontrust GF European Strategic Equity Fund

February 2020 review

The Fund’s A4 share class returned -9.6%* in euro terms in February, compared with the -8.5% return from the MSCI Europe Index and -4.0% return from the HFRX Equity Hedge EUR Index.


The month was dominated by reports documenting the spread of coronavirus and government actions to contain it. In February, cases of the disease outside of its origin in Wuhan became more frequent and, in Europe, Italy was the worst struck – leading its government to cancel the Venice carnival and impose a quarantine across a number of towns.


Investors focused on the potential impacts from the disruption caused by coronavirus on economic activity. Though little is still known about the disease, investors are anticipating a significant hit to the global economy and possibly significant stimulus from national authorities.


The result in markets was a broad-based sell-off in equities, while defensive safe havens such as gold and bonds saw greater interest. The most resilient sector in the MSCI Europe Index was utilities (-2.8%), while energy (-14.5%) and materials (-9.6%) were the worst hit areas. Commodity prices came under pressure as traders factored in the impact to demand from coronavirus.


The long book’s exposure to these two sectors weighed on returns. The likes of BW Offshore (-21.9%), Tethys Oil (-20.8%) and BHP Group (-16.7%) were among the heaviest fallers. Coronavirus also caused BW Energy, a spin-off of BW Offshore’s exploration and production business, to reduce its valuation target for its initial public offering.


Cruise operator Carnival Corp (-23.0%) was one of the worst hit stocks from the coronavirus outbreak, as travel restrictions in China and elsewhere resulted in cancelations. The company issued an update stating that it expects coronavirus will have a material impact on its financial results, though would not be able to determine the full impact while the situation continues to evolve. United Airlines (-17.0%) fell due to similar concerns, with the company withdrawing its 2020 earnings forecast of US$11-US$13 a share due to the uncertainty of the virus.


The expected reduction in consumer spending hit retailers. Adidas (-12.3%) warned that its business activity in China had been running 85% below prior-year levels since the Chinese New Year due to the virus. It had also seen traffic declines in other areas in Asia.


One of the few gainers was Coloplast (+6.3%). The Danish medical devices company saw a 13% increase in earnings before interest and taxes (EBIT) in the first quarter of its financial year (three months to 31 December 2019), while organic growth was 8%, in-line with full year guidance of 7-8%. The company noted that it is monitoring the coronavirus outbreak but the financial impact is uncertain. 


At the end of February the Fund’s net exposure stood at 75%, relatively stable from January levels. The short book did offer some protection from the equity market sell-off.


Most of the share price moves in the short book were a result of the wider market sell-off. One of the top contributors to the short book did release an update. A health care and industrials company warned that its full year profit to the end of March 2020 would be significantly below consensus, due to slow progress on cost cutting and adverse macroeconomic conditions.


Among the short book’s detractors was a US semiconductor company which reached an agreement to be acquired at a significant premium to its share price. Another short position saw a sharp rise in its share prices after fourth quarter earnings beat analyst forecasts.


Performance since launch* (%)

LESEF February 2020 Performance

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








Liontrust GF European Strategic Equity
A4 Acc EUR







*Source: Financial Express, as at 29.02.20, total return (income reinvested and net of fees). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 31.12.19, 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.

Thursday, March 12, 2020, 10:53 AM