Liontrust GF European Strategic Equity Fund

March 2019 review

The Fund’s A4 share class returned 3.0%* in euro terms in March (A3 share class 3.1%), compared with the 2.0% return from the MSCI Europe Index and 0.7% return from the HFRX Equity Hedge EUR Index.


European equity markets continued their strong form in March, providing a first quarter return of 12.8%. The Fund’s net exposure rose in March to c.42% from 33% at the end of February. This was the result of an increase in our long book as markets moved slightly away from our classification of a downtrend and back into uncertain territory.


Both long and short books made positive contributions to the Fund. The long book participated in the European equity upswing and outpaced the MSCI Europe’s total return. The short book enjoyed a particularly strong performance and contributed to overall Fund returns, despite a rising market.


The same factors behind the market’s year-to-date performance were at play again in March: easing US-China trade tensions and more dovish central bank policy. Starting with the former, President Trump declared that the trade negotiations with China were “coming along nicely” though he stated that current tariffs will remain in place until he’s sure Beijing will comply with any potential agreement. The trade war, which escalated in 2018, has dragged on global economic growth, so any indication that there could be a benign resolution tends to lift markets around the world.


Central bank policy has been a key feature for markets. Since the turn of the year, the US Federal Reserve has communicated a more “patient” approach to adjusting its monetary stance. In March, the Federal Open Market Committee’s estimates for future interest rates implied zero rate increases in 2019, which was scaled back from two forecast rises back in December. The policy setting committee also confirmed it would pause quantitative tightening by the end of September, citing slowing economic growth, household spending and business investment during the first quarter.


The European Central Bank also made a small adjustment to its forward guidance. It had previously stated that interest rates would remain at present levels until summer 2019, but in March the Governing Council guided that rates will be on hold until the end of 2019 as inflation remained sluggish in the euro area. The bank also unveiled new targeted longer-term refinancing operations (TLTRO-III) to boost the European banking system.


These central bank moves provided a broad uplift to markets, with defensive sectors leading the rise. Consumer staples (+7.2%) was the best performing sector, while health care (+4.3%) and utilities (+3.1%) also posted strong returns. The only sector to register a decline was financials (-2.0%), as banks typically benefit from higher interest rates.


The long book’s main sources of positive attribution came from its materials holdings. Russian steel maker Evraz (+14.9%) benefited from consensus beating full-year results for 2018, which it published in late February. Among the highlights was a marked improvement in free cash flow to US$1.94bn from US$1.32bn in 2017. In the past few years, the company (and the entire sector) has worked hard to reduce costs. In the results, Evraz’s management noted that its low net debt and “superior cost base” mean it will be well buffered against any potential market downturns. Rio Tinto (+10.1%) and Anglo American (+3.8%) were other holdings in the materials sector to record rises.


Floating production storage and offloading (FBSO) vessels specialist BW Offshore (+15.8%) saw its share price appreciate after announcing an agreement to acquire 70% of the Maromba offshore field in Brazil for US$90m. The company estimated potential resources of “100 to 150 million barrels of low sulphur 16 API oil”.


Carnival (-11.3%) was one of the disappointments in the long book. The cruise operator cut its 2019 adjusted earnings per share forecast to a range of US$4.35 to US$4.55, compared to December guidance of US$4.50 to US$4.80. The company said this downgrade was due to higher fuel costs and currency fluctuations. This took the shine off fairly strong results, with gross cruise revenue rising 9.5% in 2018.


Spanish pulp producer Ence Energia y Celulosa’s (-20.4%) shares fell after the Spanish General State Administration moved to nullify a 2016 resolution which granted Ence an extension of the concession of lands for the company’s Pontevedra plant. Ence estimated that the maximum impact of halting activities at this plant would be €185m, though it doesn’t expect this outcome to occur.   


In the short book, one of the biggest contributors was a luxury audio equipment maker. The company’s third quarter results disappointed versus expectations as it struggled to sell its high end television units. As a result, the group forecasts that revenue for its 2018/2019 financial year would decline and cash flow would be negative. A US casino operator was also among the contributors after its fourth quarter results fell short of consensus expectations.


One of the detractors from the short book was a UK grocery delivery company which in late February announced a deal with a large cap food, fashion & home retailer, which was well received by the market. A subsequent trading updated showed the group overcame a setback from a warehouse fire to grow revenue in 13 weeks to the beginning of March.


Performance since launch* (%)


Liontrust European Strategic Equity Fund March 2019 Performance 

Discrete monthly returns (A4 share class)*

1yr since 25/04/14
Fund 4.2% 28.6%
MSCI Europe 5.5% 28.8%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 7.6% 1.3% 3.0%
MSCI Europe 6.2% 4.2% 2.0%
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 31.03.2019, total return (income reinvested and net of fees). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 31.03.2019, 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. 


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, April 16, 2019, 10:17 AM