Liontrust GF European Strategic Equity Fund

November 2020 review

The Fund’s A4 share class returned 7.4%* in euro terms in November. The Fund’s comparator benchmarks, the MSCI Europe Index and HFRX Equity Hedge EUR Index, returned 13.3% and 3.9% respectively.


Equity markets were in a state of euphoria in November, with the MSCI Europe Index registering its largest euro-terms gain since April 2009. The causes of the bullish sentiment were the announcements of Covid-19 vaccine candidates which showed 90%+ efficacy and provided hope of a route out of the pandemic.


While a number of European countries entered new lockdowns in early November, Pfizer and BioNTech released successful late-stage trial results for their vaccine candidate, sparking a surge in stock prices. This was followed the very next week by Moderna reporting similarly effective results and throughout the rest of the month other vaccine candidates from around the world also provided promising updates.


In markets, a strong rally ensued in those stocks which had been amongst the hardest hit during the Covid-19 crisis. The best performing sector was energy (+34%), clawing back some of the 51% year-to-date losses prior to November. Financials (+25%) and consumer discretionary (+16%) were the other big gainers. From a style perspective, the vaccine rally provided a major boost for value stocks, a trend we recently wrote about. The MSCI Europe Value Index returned 20% during the month, outperforming both the market and the MSCI Europe Growth Index’s 8.6% return.


The other major market development was Joe Biden’s victory in the US election. The contest was tighter than pre-election polls suggested and the touted “blue wave” failed to materialise, but ultimately the Democratic candidate won the required electoral college votes in a record turnout. Incumbent Donald Trump refused to concede and claimed, without evidence, wide-spread voter fraud. However, Trump’s accusations were largely ignored by investors who concentrated on the prospects of a Democrat leader in a post-pandemic world.


The US election result gave further impetus to value stocks, which was a boon to the Fund’s long book. The long book comfortably outperformed the MSCI Europe, but as expected in a rising market the short book detracted from the Fund’s overall performance. At the end of November, the Fund’s net exposure stood at 61%.


Like the MSCI Europe, the long book’s best performers belonged to the energy and financials sectors, including the likes of Deutsche Pfandbriefbank (+60%), BW Offshore (+62%) and BNP Paribas (+37%).


Whilst the main driver of these companies’ shares was the vaccine news, they also released third quarter results. Deutsche Pfandbriefbank recorded a 7.1% pre-tax profit increase in Q3, partly driven by a rise in net interest and commission income. The company expects a “solid” fourth quarter operating result but remained cautious about the effect of the Covid-19 pandemic to real estate markets and withheld guidance. However, management stated that the business was well positioned to handle this uncertainty given its conservative risk strategy, good capital base and comfortable liquidity position.


BW Offshore’s results showed a decrease in earnings before interest, taxes, depreciation and amortisation (EBITDA) to US$98.1m, from US$116m. This was below consensus estimates of US$116m and was mainly the result of the Yùum K'ak' Náab tanker having to halt production. However, the company was optimistic in its outlook, stating that its floating production storage and offloading (FPSO) fleet should continue to be cash generative despite the disruption to the oil exploration and production market.

French bank BNP Paribas reported a 36% increase in Fixed Income, Currencies and Commodities trading revenue, coming in at 1.25bn and ahead of analyst estimates of €1.0bn. Equity and Prime Services also beat the market’s forecast, rising 21%, and total revenue was stable compared to the same period last year.


Given how much Covid-19 has disrupted the travel and leisure sector, it was no surprise to see United Airlines (+30%) and Carnival (+42%) enjoy a significant rebound. Carnival used the rally to issue US$1.5bn worth of equity, the proceeds of which will be used for “general corporate purposes”.


William Hill (-2.4%) was a notable long book detractor after private equity group Apollo Global Management Group confirmed media reports that it does not intend to make a bid for the UK-listed bookmaker, leaving US gaming company Caesars Entertainment as the sole suitor. William Hill had accepted a £2.9bn takeover offer by Caesars in September.


The market rally provided a headwind to the portfolio’s short book, with a number of holdings seen to benefit from the emergence of a Covid-19 vaccine. One non-vaccine related detractor was a US business communication software company, which saw its shares rise sharply as a result of reported takeover interest. Another holding rose following a victory in a public vote in California over the classification of its employees.


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 30.11.20, total return (income reinvested and net of fees). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 30.09.20, 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, December 18, 2020, 4:09 PM