Liontrust GF European Strategic Equity Fund

May 2018 review

The Fund’s A4 share class returned 1.2%* in euro terms in May (A3 share class 1.2%), compared with the 0.1% return from the MSCI Europe Index and 0.1% return from the HFRX Equity Hedge EUR Index.

Net exposure at month end reduced to c.39%. We are in the process of implementing changes to the portfolio resulting from this year’s annual review of companies’ reports and accounts. The Fund’s positive performance in May was driven by good returns from the long book which came against a backdrop of flat European equity markets.


Having been seen as a near certainty as recently as mid-April, expectations of a May rate hike from the Bank of England (BoE) dropped to almost zero ahead of its policy meeting due to soft Q1 economic data. The BoE duly left rates on hold; markets are not pricing in the next rise until the August meeting.


Trade tensions between China and the US eased for most of May, before being sparked again by Trump’s decision late in the month to move ahead with tariffs on US$50bn of Chinese imports. The US also announced that the EU, Canada and Mexico would be subject to tariffs, once again raising the prospect of retaliatory action. 


Momentum in oil prices continued with Brent oil surpassing US$80/barrel for the first time since 2014. The rise in May reflected a combination of Venezuela’s oil exports declining under the pressure of political and economic turmoil and the anticipation of Iranian crude sales slowing after the US withdrew from the nuclear deal.


Elsewhere, the market was captivated by developments in Italy. The country’s two leading parties looked close to forming a government before their candidate for finance minister was blocked by President Sergio Mattarella. This sparked concern that another election could be held where anti EU parties could gain even more power. Investors sold out of Italian debt and equities causing the Italian central bank to intervene and purchase bonds to stabilise the market. Calm was restored towards the end of the month, as a deal to form a government again looked likely.


IT stocks were the top performers across European markets in May, the sector registering a 6.7% gain in euro terms. Materials (+4.5%) and energy (+3.5%) sectors also had a good month. Telecoms (-8.3%) and financials (-6.3%) were notable areas of weakness while utilities (-2.2%) also recorded a negative return.


Much of the Fund’s gains can be attributed to the long book’s oil related stocks such as Tethys Oil (+27.7%), Lundin Petroleum (+20.6%). The net long position in the materials sector also contributed to gains as stocks such as Evraz (+11.6%), Reliance Steel & Aluminium (+10.9%) and BHP Billiton (+12.1%) moved higher.


Elsewhere in the long book, Codan (+23.7%) was a source of strength. The Australian company develops technology for use in rugged environments. It issued a trading statement confirming that sales had strengthened in the second half of its financial year, which ends on 30 June 2018. Sales of metal detectors have risen, driven by its Equinox coin and treasure detector. Underlying net profit after tax is expected to be around A$38m. On the same day, Codan announced that one of its subsidiaries had been awarded a contract with BHP fleet management solutions – including proximity detections, tracking and task management – for its Olympic Dam mine in South Australia. The contract value is estimated to be A$9.5m.


Simcorp (+14.9%) shares rallied on the back of a solid set of Q1 numbers and the maintenance of full-year forecasts. Q1 revenue increased 23% year-on-year, the result of organic expansion and the acquisition of SimCorp Italiana. Operating profit more than doubled. The provider of portfolio management software commented that 2018 forecasts are maintained at 10%-15% local currency revenue growth with an operating profit uplift of 24.5% to 27.5%. Intertek (+12.7%) released a trading statement revealing organic revenue growth of 4% in the first four months of 2018, and commenting it is on track to achieve margin expansion.


Among the long book’s detractors, Oriflame (-23.3%) fell on outlook comments. The cosmetics retailer recorded an 8% sales increase in the first quarter of 2018, boosted by the timing of catalogues, but operating margins were squeezed by 40bps to 9.2% due to negative currency trends. The company commented that a notable slowdown in sales in Russia as well as a negative effect from the timing of catalogues and conferences were affecting the start of the second quarter.


Performance since launch* (%)

LESEF May Review

Discrete monthly returns*

1yr since
Fund** 0.4% 25.2%
MSCI Europe 2.4% 27.8%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund** 0.7% 1.1% -1.7% 1.5%
MSCI Europe 1.6% -3.9% -2.0% 4.6%
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%
**A4 share class


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 31.05.2018, total return (income reinvested and net of fees).

**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 the Fund involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. 


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.

Wednesday, June 6, 2018, 4:16 PM