Liontrust GF European Strategic Equity Fund

March 2018 review

The Fund’s A4 share class returned -1.7%* in euro terms in March (A3 share class -1.7%), compared with the -2.0% return from the MSCI Europe Index and the -0.9% return of the HFRX Equity Hedge EUR Index.

 

Net exposure at month end was c.52%, down from c.62% last month, a reduction which is reflective of a more uncertain market backdrop. An unwinding in some of last month’s long book strength, when it rose despite a falling market, was a drag on performance in March. However, the short book was able to offset some of this weakness, allowing the Fund’s return to exceed that of the MSCI Europe Index.   

 

European stocks took another leg lower in March, this time due to growing concerns of a trade war. US President Donald Trump announced a 25% tariff on steel imports and a 10% tariff on aluminium imports. This raised expectation of retaliation from other major powers and Trump’s hint that some trading allies will be temporarily spared from the tariffs was not enough to reverse market sentiment. In addition, Trump announced a 25% tariff on up to US$60bn in annual imports from China.

 

Elsewhere, global monetary policy continued to tighten. New US Federal Reserve Chair Jerome Powell oversaw the central bank’s first interest rate increase of 2018. Though the Federal Open Market Committee’s dot-plot of future interest rate estimates showed no change to the three projected hikes in 2018, its rate expectations for 2019 were upgraded. The European Central Bank dropped wording about expanding its bond-buying programme from its policy statement, indicating another step towards curbing its quantitative easing scheme.

 

In terms of sector performances, having underperformed in recent months, utilities (+4.8%), real estate (+3.4%) and consumer staples (+0.4%) were the biggest gainers in the MSCI Europe Index in euro terms. The reverse was true for the biggest fallers, with financials (-5.6%), materials (-4.6%) and IT (-3.9%) having had strong performances prior to March.

 

The materials sector was negatively impacted by Trump’s tariffs, with base commodity prices falling. Iron ore producer Ferrexpo (-19.6%) was one of the long book holdings to suffer from this. Its share price decline came despite strong full-year earnings, in which it reported a doubling in profit, helped by an increase in pellet prices. The company was bullish in its outlook for the iron ore market, citing rationalisation of Chinese steel capacity.

 

There were some bright spots for the long book, including oil services company Hunting (+11.5%), which revealed that it swung to an underlying profit in 2017. It stated that the performance was supported by the Hunting Titan product line, which benefited from increased onshore drilling activity in North America. The group was confident that oil prices would remain above US$60/barrel and this will stimulate further offshore drilling.

 

In the short book, one of the contributors was a lighting products and wiring company which issued a profit warning following ongoing consumer weakness in the UK and a depreciated dollar. There was another profit warning by a UK-based food maker. The company stated that low capacity utilisation in its US business and the current pound/dollar exchange rate means that profit growth in its US business will be less than expected in financial year 2018.

 

One of the detractors from the short book was an electronics company which received a takeover approach from a US private equity firm.


Performance since launch* (%)

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


Discrete monthly returns*

1yr since 25/04/14
Fund† 0.3% 23.4%
MSCI Europe -0.4% 22.1%

 

2018
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund† 0.7% 1.1% -1.7%
MSCI Europe 1.6% -3.9% -2.0%
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:

 

Mar-18

Mar-17

Mar-16

Liontrust GF European Strategic Equity A4 Acc EUR

0.3

10.7

-1.1

 

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

 

*Source: Financial Express, as at 31.03.2018, 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. 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, April 12, 2018, 12:19 PM