Liontrust GF European Strategic Equity Fund

June 2019 review

The Fund’s A4 share class returned 3.1%* in euro terms in June (A3 share class 3.2%), compared with the 4.4% return from the MSCI Europe Index and 1.4% return from the HFRX Equity Hedge EUR Index.

 

The Fund’s net exposure remained relatively steady during June at 74%. The long book contributed to the Fund’s performance but its return was just short of the MSCI Europe Index. The short book detracted from the Fund given the gains made by European equities though it performed better than expected in such a market.

 

Central bankers provided impetus for markets to bounce back from their wobble in May. The US Federal Reserve gave its strongest hint yet that it is ready to loosen its monetary policy. The bank dropped the word “patient” from its June policy statement, while noting that uncertainties have increased with regards to outlook for inflation and economic growth. The Federal Open Market Committee will “act as appropriate to sustain the expansion”. According to futures markets, a rate cut in the next meeting in July is certain.

 

The Fed’s statement came after European Central Bank (ECB) President Mario Draghi indicated the possibility of extra monetary support for the eurozone. In a speech on 20 years of ECB’s monetary policy, Draghi highlighted that risks to the economic outlook remained tilted to the downside and if there isn’t an improvement then additional stimulus would be required. His speech sparked a rally in eurozone debt with the yield on German 10-year Bunds reaching a new record low.

 

Away from central banks, an escalation in geopolitical tensions saw a surge in oil prices in the second half of June. Iran was blamed for an attack on two oil tankers in the Gulf of Oman and the downing of a US reconnaissance drone. Trump said US aircrafts were en route to strike back against Iran, but he called off the attack at the last minute. The fears that this conflict could continue and potentially disrupt oil supply lines saw the price of Brent rise 11% in the second half of June. The price of gold, a traditional safe haven, meanwhile reached its highest price in over five years.  

 

Supply constraints were part of the reason behind the rise in iron ore prices after miner Rio Tinto lowered its 2019 guidance following challenges in its Pilbara operations in Western Australia. The company now expects to produce 320m-330m tonnes of iron ore this year compared to previous guidance of 333m-343m tonnes. The reduction in supply boosted iron ore prices and the share prices of mining companies. Long book holdings Anglo American (+17.0%) and BHP Group (+11.5%) were both beneficiaries of this.

 

This trend was also reflected in the sector performances in the MSCI Europe Index, with materials (+7.7%) the biggest gainer. There were also big rises for consumer discretionary (+7.7%) and industrials (+6.6%), while real estate was the only sector to end in the red, falling 5.0%.

 

There were a number of stocks in the long book which participated in the rise in European equities, with some companies such as CIE Automotive (+17.5%), Moncler (+13.9%) and Kardex (+11.1%) all making double digit returns without releasing any corporate newsflow.

 

There were also a couple of notable disappointments which held back the returns of the long book. Swedish Match (-8.3%) shares declined after US tobacco giant Altria bought a controlling interest in the Burger Sohne companies which commercialise oral tobacco-derived nicotine brand on!. Concerns about the extra competition for Swedish Match depressed investor sentiment towards the snus, moist snuff, and chewing tobacco company.

 

Carnival’s (-12.1%) interim results provided a gloomy outlook for the cruise-ship operator. The company’s Chief Executive Arnold Donald said that geopolitical and macroeconomic headwinds have depressed booking trends for Carnival’s continental European brands. The company was also impacted by the sudden US government policy change on travel to Cuba and disruptions to US cruise line Carnival Vista. This resulted in the company cutting its full-year adjusted earnings per share forecast to the range US$4.25-US$4.35, compared to earlier guidance of US$4.35-US$4.55, which itself had been cut in March.

 

The Fund’s short book suffered during the wide-spread gains in June. A number of holdings made strong returns including a Norwegian sporting goods company, which rose after expectations for a private equity takeover of the company. A US based data cloud company was among the contributors to the short book. It reported poor first quarter results and forecast further losses for the second quarter and negative cash flow for the full year. It also announced the retirement of its CEO.

 

Performance since launch* (%)

Liontrust European Strategic Equity Fund June 2019 Performance

Discrete monthly returns (A4 share class)*

1yr since 25/04/14
Fund 2.5% 26.6%
MSCI Europe 4.5% 32.7%
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%
MSCI Europe 6.2% 4.2% 2.0% 3.8% -4.9% 4.4%
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:

 

 

Jun-19

Jun-18

Jun-17

Jun-16

Jun-15

Liontrust GF European Strategic
Equity A4 Acc EUR

2.5

3.0

5.3

2.9

10.1

 

*Source: Financial Express, as at 30.06.2019, total return (income reinvested and net of fees). Non fund-related return data sourced from Bloomberg.

 

**Source: Financial Express, as at 03.07.2019, 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. 

Thursday, July 11, 2019, 9:27 AM