Liontrust GF European Strategic Equity Fund

October 2020 review

The Fund’s A4 share class returned 1.4%* in euro terms in October. The Fund’s comparator benchmarks, the MSCI Europe Index and HFRX Equity Hedge EUR Index, returned -5.0% and -0.6% respectively.


Global equity markets struggled in October, weighed down by resurgent Covid-19 fears and fading hope of a US fiscal stimulus package being announced ahead of November’s election. The month began in dramatic terms as Donald Trump confirmed he had tested positive for Covid-19. As he made a swift recovery, markets hoped that negotiations with Democrats regarding a new virus-relief stimulus package might receive fresh impetus, but no agreement was reached.


More broadly, the path of the pandemic caused growing concern in Western markets as evidence of a second wave of infections mounted. Many countries began reintroducing lockdown measures that had previously been relaxed. Estimates of the economic impact of Covid-19 continued to feed through; the IMF now expects a 4.4% global contraction in 2020, better than its June estimate of a 5.2% fall. One of the key factors in moderating the decline has been China’s recovery; it posted 4.9% year-on-year growth in Q3, taking its year-to-date growth into positive territory following Q1’s dramatic drop.


All sectors of the MSCI Europe Index lost ground in euro terms during October. Energy (-6.8%) was once again among the worst performers and has now lost more than 50% this year. IT (-11%) has been one of the sectors to cope best with the pandemic, remaining in positive territory year-to-date, but it was the worst hit in October as large constituent SAP lost over 30% on downgrades to its outlook.


The Fund’s strong relative performance stems from its modest net market exposure (52%) in a falling market, strong contribution from the short book and the long book’s outperformance of the market.


Short book performance highlights included a German software giant that cut revenue guidance for 2020 and pushed back strategy goals for future years; a Danish insurer and a German IT group whose Q3 results disappointed relative to market expectations; and a Norwegian clean energy specialist that is implementing a business spin-off and capital-raise.


There were also some positive updates from holdings in the long book. For example, Bank of Ireland (+33%), issued surprisingly robust Q3 results. The company described trading conditions as generally improving compared with Q2, with a 30% increase in Irish mortgage completions and a doubling in bespoke mortgage completions for its UK business.


Danish jewellery retailer Pandora (+11%) issued a Q3 trading update in which it raised guidance for full year sales, albeit still forecasting a significant fall. It now expects a 2020 sales fall of between 14% and 17%, compared with its previous forecast of 14% to 20%. It also updated operating margin guidance to the top end of its previous range: from 16% - 19% to 17.5% - 19%. A better-than-expected sales performance in Q3, with organic sales falling 5%, was driven by 89% year-on-year growth in online sales. Promotional merchandise company 4imprint (+12%) also rose after a trading update showed further recovery in order levels. Weekly order intake troughed in April at less than 20% of the previous year’s level but recovered to just above 50% in August and has now risen to over 60%. Order values are also above last year’s level, meaning that average weekly revenue in October was around 65% of the 2019 comparable.


Among the long book’s weaker stocks, global catering specialist Elior Group (-18%) highlighted the impact of Covid-19 on its business by announcing up to 1,900 job cuts in its French operations. The company noted that the pandemic has accelerated shifts in working patterns that were already underway. It estimates a shift in remote working to over two days per week from less than one day a week a year ago, has led to a drastic drop in volumes at its commercial and industrial sites and necessitated “extensive” structural business changes.


Danish pharmaceutical company Novo Nordisk (-6.6%) raised its full-year sales and profit guidance early in October but went on to lose ground as its Q3 results disappointed against high expectations. The company stated that the Covid-19 impact on business has been lower than it anticipated, leading it to upgrade sales growth guidance from a 3% - 6% range to 5% - 8% and lift forecast operating profit growth from 2% - 5% to 5% - 8%. However, its Q3 operating profit of DKr12.8bn was a little below the DKr13.0bn consensus analyst forecast.


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 31.10.20, 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.

Wednesday, November 11, 2020, 2:02 PM