Liontrust GF European Strategic Equity Fund

September 2019 review

The Fund’s A4 share class returned 4.8%* in euro terms in September, compared with the 3.8% return from the MSCI Europe Index and 0.7% return from the HFRX Equity Hedge EUR Index.


Global equities staged a recovery from August’s slump as central bank policy again took centre stage. The European Central Bank cut benchmark interest rates further into negative territory and altered its forward guidance to state that rates would remain at these levels or lower until inflation picked up to close to the 2% target. Previously the bank had only committed to avoiding rate rises until mid-2020. It also revived quantitative easing, announcing an open-ended €20bn-a-month programme from November.


The US Federal Reserve cut rates by 25 basis points to a range of 1.75%-2.0%, in a move interpreted as a hawkish cut. The Fed’s indication that further cuts should not be expected drew the ire of President Trump, who launched another twitter attack on Jay Powell. Trump became more incensed as a formal impeachment enquiry was opened later in the month after accusations that he had asked Ukraine to investigate Joe Biden.


Developments in the US-China trade spat continued to be volatile, with both parties announcing some temporary postponement of tariffs before the month finished with speculation the US was exploring ways of limiting investment in China’s financial markets. Political volatility was also an ongoing feature in the UK as Parliament passed an emergency law to stop no-deal Brexit and then blocked Boris Johnson’s attempts to hold a snap election. He proceeded to suspend Parliament, only for the Supreme Court to rule that the move was unlawful.


Oil prices surged following attacks on Saudi Arabian oil facilities that were blamed on Iran. Brent crude rose 15% to US$69/barrel on the day of the attack, before settling down to US$61 by month end. The European energy sector rose 6.8% in September, beaten only by financials (+8.5%). More typically defensive sectors such as consumer staples (-0.3%) and health care (+1.6%) were the laggards.


The Fund’s net exposure at the end of September was c.68%. Long book returns beat the market average while the short book, although detracting overall in a buoyant market, showed limited participation in the rise.


The Fund’s net position reflects our generally constructive view of equity markets, which is supported by a lack of egregious valuations and widespread uptrends in the major equity market indices.


There was a significant shift in the style bias to market returns in September, as equities with ‘value’ characteristics markedly outperformed those with ‘growth’ credentials. The MSCI Europe Value index returned 6.2%, compared to the 1.7% from the Growth index. Momentum-based strategies proved very volatile as market leadership shifted between these groups of stocks.


We have noted surges in both corporate optimism and investor anxiety in the US. Investor anxiety has climbed particularly in sectors vulnerable to a prolonged trade war with China. While these conditions are not replicated in Europe, style and market direction in Europe are highly correlated with developments in the US, so we will monitor developments closely. High investor anxiety often precedes strong performance from value strategies, so while this measure remains elevated we could observe further sharp bouts of style rotation.


September’s Fund stock selection was particularly strong within the IT sector, where Codan (+18.2%), an Australian developer of technologies for use in harsh environments, was among the long book’s largest risers. On the short side, disappointing Q2 results from a US cloud software company made a positive contribution to the Fund, as did a UK provider of support services to the video gaming industry that released interim results during the month. The positive IT sector performance was achieved despite losses on short positions in a Norwegian semiconductor designer whose shares rallied on a broker upgrade and a US cloud computing company that beat expectations with Q2 results.


Elsewhere within the long book, Bovis Homes (+12.4%) was another key positive contributor. Investors welcomed the news – released on the same day as interim results – that the company had re-initiated discussions around a deal to acquire Galliford Try’s housing division


Performance since launch* (%)

LESEF September 2019 Performance

Discrete monthly returns (A4 share class)*


1yr since 25/04/14
Fund 3.0% 29.5%
MSCI Europe 6.2% 36.0%
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%
MSCI Europe 6.2% 4.2% 2.0% 3.8% -4.9% 4.4% 0.3% -1.4% 3.8%
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 30.09.2019, 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.


Wednesday, October 16, 2019, 9:20 AM