Liontrust GF European Strategic Equity Fund

May 2020 review

The Fund’s A4 share class returned -1.8%* in euro terms in May. The Fund’s comparator benchmarks, the MSCI Europe Index and HFRX Equity Hedge EUR Index, returned 3.0% and 1.2% respectively.


Stocks in Europe continued to claw back lost ground as countries began tentatively reopening select parts of their economies. Lockdowns across the continent, and other areas of the world, were imposed to contain the spread of Covid-19 but have also strangled economic growth. The easing of lockdown measures and evidence of a suppression in coronavirus cases provided support to equities.


However, there are still a number of factors that will keep investors uneasy. Outside of the direct Covid-19 threat, US-China tensions are chief among them. Trump threatened economic measures against China and accused its government of mishandling the coronavirus outbreak. The US-China trade war had been one of the main drags to global growth in the past few years so a resumption of it while the world is battling coronavirus would be unwelcome.


Industrials (+6.7%) ended May as the best performing sector in the MSCI Europe Index, followed by IT (+6.2%) and materials (+5.9%), providing a slight cyclical bias to returns. The only sector to end lower was energy (-2.2%), despite oil prices recovering from their April lows.


The net exposure of the Fund at the end of May was 52%. The short book once again overshadowed the long book performance, which had outpaced the returns of the MSCI Europe Index. The short book’s positions in the IT and health care sectors particularly weighed on its performance as these two sectors have been among the most resilient during the crisis.


One of the largest detractors this month was a health care stock which saw its shares rise sharply after its treatment for a rare and chronic autoimmune disorder met its primary goal in late-stage trials. Another company to see shares rise was a clean energy business which posted first quarter results showing record revenue generation despite the Covid-19 crisis.


As mentioned in previous reviews, we have repositioned the Fund according to the signals provided by our proprietary market indicators. We have increased exposure to traditional defensive stocks in the short book which had been the most resilient in the initial coronavirus sell off. This is reflective of the high investor anxiety, which we see as a contrarian indicator and that this area of the market has now become overcrowded.


The flip side of high investor anxiety – combined with very wide valuation spreads – is that a significant opportunity in value has been presented. We have positioned the long book to exploit this and despite the relatively muted value performance in May, the long book posted a strong return.


Pandora (+38.1%) was one of the best long-book performers, with shares rebounding to reach mid-February levels. The Danish jewellery company issued a reassuring first quarter statement which explained that it has enough liquidity to sustain a scenario where all its physical stores remained closed for the rest of 2020. Pandora said that online sales were strong in April and it is gradually reopening physical stores, mainly in Germany. The group also announced that it agreed an additional DKr3bn loan facility and intends to sell 8m treasury shares.


French market research company Ipsos (+24.2%) reported that new orders have started coming in during May, as lockdowns began easing, and the run rate is now just below last year’s level. The company said that much of the new demand for its services have been directly related to Covid-19 research from both public and private institutions.


William Hill (+13.0%) was another stock to benefit from the easing of lockdown measures. The Premier League and Championship arranged a date to restart the season and the UK government indicated that professional sport could resume behind closed doors. In a trading statement, the bookmaker indicated a 57% decline in net revenue during the period 11 March-28 April. It said that sports betting declined sharply, though this was less than expected as customers moved to niche sports and emerging market football, which was still ongoing. 


New guidance from investment software provider SimCorp (+17.2%) was well received. The company expects 2020 revenue growth of between -5% and +5% but admitted there is still significant uncertainty in the market. Prior to the coronavirus outbreak, it had expected revenue growth of 5%-10%.


One of the long-book holdings to see a decline in May was housebuilder Vistry Group (-8.7%), despite reporting on resilient trading. Reservations, completions and cash management had all been better than it expected during the lockdown period. It said it has now restored over 70% of operations in its partnerships business and has continued to increase its pipeline which now stands at £827m. Sales offices within its housebuilding division have reopened for appointments and have seen 300 reservations net of cancelations during the lockdown period.


Bank of Ireland (-12.3%) reported that it swung to an underlying pre-tax loss of €235m in Q1 after suffering from Covid-related market movements and impairment costs. The group revealed that it booked a €266m impairment charge, €250m of which was for a Covid-19 management overlay to reflect the deteriorating economic environment. Further impairments and loan losses are expected throughout the rest of 2020, while lower business activity could lead to 2020 lending volumes being 50-70% of 2019 volumes. Bank of Ireland also saw an additional €155m impact from adverse movements on valuations from the Covid-19 fallout.


Performance since launch* (%)

LESEF Performance May 2020

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








Liontrust GF European Strategic Equity
A4 Acc EUR






MSCI Europe






HFRX Equity Hedge EUR







*Source: Financial Express, as at 31.05.20, total return (income reinvested and net of fees). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 31.03.20, 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.

Friday, June 12, 2020, 3:19 PM