Liontrust GF European Strategic Equity Fund

October 2019 review

The Fund’s A4 share class returned 1.9%* in euro terms in October, compared with the 0.9% return from the MSCI Europe Index and 0.3% return from the HFRX Equity Hedge EUR Index.


Equity markets began the month on unstable footing as traders reacted to poor US private sector payrolls data and further weakening in global manufacturing indicators. This added to ongoing trade war and Brexit uncertainties and resulted in a global stockmarket slump.


During the rest of October, stocks gradually clawed back their losses. There were some tentative signs of progress in the US and China trade talks, with US trade representatives stating they are close to finalising some sections of the “phase one” deal. There have been many false dawns when it comes to thawing trade relations between the two superpowers so investors were limited in their enthusiasm.


Brexit developments also caught the market’s attention. PM Johnson struck a deal with the EU and although he failed to get it ratified by parliament and meet the 31 October deadline, he was successful in securing a December general election.


Brexit and trade news fed into the US Federal Reserve’s decision to signal no further immediate monetary easing measures following a third interest rate cut in its October meeting. Chair Jerome Powell said that chances of a no deal Brexit have materially declined and the potential of phase one agreement with China has meant that the principal risks to global growth have subdued.


Gains on the MSCI Europe Index had a cyclical tilt. Consumer discretionary (+3.5%), industrials (+3.4%) and financials (+2.0%) were among the best performers in euro terms. Consumer staples (-3.7%) and energy (-2.5%) were the biggest fallers.


The Fund’s net exposure ended the month at c.68%. Performance in October was driven by the long book, which markedly outperformed the market, more than offsetting the short book’s negative impact.


Reliance Steel & Aluminum (+13.9%) was one of the stand out long book stocks. The US metals processing and distribution company revealed a positive outlook in its third quarter update, with end demand expected to hold up well in the final quarter of the year and prices predicted to remain at current levels. This led the company to forecast diluted earnings per share of between US$1.60 and US$1.70 in the fourth quarter, which was above the US$1.59 market estimate.


Books and stationery seller WH Smith (+13.4%) announced the US$400m acquisition of US travel retailer Marshall Retail Group. The deal was partly funded by a £155m equity placing. WH Smith highlighted Marshall’s strength across high footfall airport, resort and tourist locations, adding that the acquisition will broadly double WH Smith’s International Travel business.


Evraz (-19.1%) was also looking to make significant investments. At a capital markets day, the steel maker said it is considering three major investment projects which could see capital expenditure increase by around US$1bn per annum, as it targets increased sales. Capex levels are expected to be US$850m for 2019.


Nordic construction company Peab (-7.4%) was another long book faller. The group recorded a 5.9% decline in third quarter pre-tax profit to SKr706m, below the consensus estimate of SKr746m. Peab noted that signs of an economic downturn in Sweden became clearer in the third quarter and housing construction is expected to decline in 2019 and 2020. Finnish housing demand is also forecast to slow in 2020, though Norway’s demand is expected to remain stable.


A French car rental company was a contributor to the Fund’s short book after the company’s third quarter results came in below market expectations and the company cut 2019 profit guidance. A US takeaway company also contributed to the short book as its shares de-rated on the back of a poor trading update. It said rising competition in a market which is becoming saturated has weighed on its outlook.


Performance since launch* (%)

LESEF October Performance 2019

Discrete monthly returns (A4 share class)*

1yr since 25/04/14
Fund 9.6% 31.9%
MSCI Europe 12.6% 37.3%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 7.6% 1.3% 3.0% -1.6% -3.1% 3.1% -1.6% -0.8% 4.8% 1.9%
MSCI Europe 6.2% 4.2% 2.0% 3.8% -4.9% 4.4% 0.3% -1.4% 3.8% 0.9%
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







*Source: Financial Express, as at 31.10.2019, total return (income reinvested and net of fees). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 30.09.2019, 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.

Monday, November 18, 2019, 9:33 AM