Liontrust GF European Strategic Equity Fund

June 2021 review

The Fund’s A4 share class returned -4.6%* in euro terms in June. The Fund’s comparator benchmarks, the MSCI Europe Index and HFRX Equity Hedge EUR Index, returned 1.7% and 1.1% respectively.

 

Despite a mid-month wobble following a more hawkish than expected Federal Reserve statement, the MSCI Europe Index ended June higher, its fifth consecutive month of gains. The Federal Open Market Committee’s (FOMC) dot plot of members’ future interest rate expectations indicated that interest rates are forecast to start to rise in 2023, having previously been predicted to remain constant until 2024. Economic projections were optimistic, with the median estimate of GDP growth revised up to 7% for 2021 versus 6.5% in March, while core inflation is forecast to be 3% vs 2.2%.

 

There was a sharp reversal of recent trends in equity market leadership, with growth outperforming value. The MSCI Europe Growth Index posted a return of 3.4% in euro terms while the MSCI Europe Value Index was flat. Given its value bias, this factor reversal weighed on the Fund’s returns, with the long book underperforming the market and the short book making a negative contribution in June. At the end of the month the Fund’s net exposure stood at 54%.

    

From a sector perspective, healthcare (+6.8%), IT (+4.5%) and energy (+3.5%) were the best performing sectors, while financials (-2.4%) and utilities (-2.0%) were the only sectors to end lower.

 

The weakness in financial stocks weighed on the long book, with Deutsche Pfandbriefbank (-14%) and Bank of Ireland (-14%) both among the heaviest fallers. The latter’s share price fell after the Irish government announced that it planned to sell part of its 13.9% shareholding in the company over a six-month period.

 

Another detractor from the long book was cruise operator Carnival (-8.1%). The company has had a tough time during the Covid crisis with the majority of its operations halted by travel restrictions. There was some evidence that the tide was turning, with Carnival stating that its operating loss for the three months to 31 May 2021 narrowed to US$1.6bn from US$4.2bn in the prior three months.

 

Eight of the company’s nine brands have resumed operations or have announced plans to be operational by 30 November 2021, the end of its financial year. However, the full fleet is not expected to be back in operation until spring 2022, later than expected.

 

Belimo (+11%) was among the top gainers after the Swiss air-con actuator manufacturer said it expects to deliver a significant increase in sales and profit for the first half of 2021. The company experienced consistently high demand across all of its regions, which it expects to result in a 10% year-on-year increase in sales over the period. This sales increase, in combination with reduced travel and marketing expenses, has bolstered profitability. The outlook is more uncertain for the full year with increases in price of raw materials and shortages of parts likely to see lower construction activity and longer lead times.

 

Danish pharmaceutical company Novo Nordisk (+9.2%) saw its shares rise after its weight loss treatment Wegovy gained approval from the US Food and Drug Administration.

 

Within the short book, the largest detractor was a space flight company whose shares soared after receiving regulatory approval for passenger flights to space.

                                                                                                                   

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

 

Jun-21

Jun-20

Jun-19

Jun-18

Jun-17

Liontrust GF European Strategic Equity
A4 Acc EUR

36.9%

-15.5%

2.5%

3.0%

5.3%

MSCI Europe

27.9%

-5.5%

4.5%

2.8%

18.0%

HFRX Equity Hedge EUR

19.0%

-4.5%

-6.3%

3.5%

6.0%

 

*Source: Financial Express, as at 30.06.21, total return (income reinvested and net of fees). Non fund-related return data sourced from Bloomberg.

 

**Source: Financial Express, as at 30.06.21, 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.

Tuesday, July 13, 2021, 1:33 PM