Liontrust GF European Strategic Equity Fund

September 2020 review

The Fund’s A4 share class returned -1.9%* in euro terms in September. The Fund’s comparator benchmarks, the MSCI Europe Index and HFRX Equity Hedge EUR Index, returned -1.4% and -0.1% respectively.

 

Equity markets in Europe hit a stumbling block in September as concerns about a second wave of coronavirus and associated lockdown measures grew. Daily recorded cases of the virus, particularly in Europe, have risen to levels seen during the initial outbreak and stricter restrictions have been put in place in some regions.

 

The hardest hit areas in the MSCI Europe Index were energy (-12%) and financials (-7.7%) as investors considered the economic strains of new lockdowns. The best performers, in euro terms, were consumer discretionary (+2.1%), consumer staples (+1.3%) and health care (+1.0%).

 

The resilience of the consumer sector was somewhat surprising given the outlook for inflation in the euro area. European Central Bank President Christine Lagarde acknowledged that inflation is expected to be negative over the coming months, reflecting weak energy prices, a stronger euro and a temporary reduction in VAT in Germany. The Bank’s forecasts show that inflation is expected to be below its target of close to 2% for at least the next two years. Lagarde reiterated that the governing council stood ready to act to ensure inflation moves towards its aim in a sustained manner.

 

The Fund’s net exposure levels at the end of the month was 50%. Although the long book outperformed, the short book didn’t offer its usual protection within a falling market, meaning the Fund trailed the MSCI Europe.

 

William Hill (+58%) continued its stellar recent share price run. The UK bookmaker confirmed that it had received a takeover approach by Caesars Entertainment in addition to the proposal by Apollo Management International late in August. It did not indicate the financial details of the proposals and stated that it remains in discussions with both parties.

 

Corporate news was thin on the ground during September. Adidas (+8.4%) saw its shares rise following strong results from peer Nike, while Swedish oil and gas exploration and production company Lundin Energy (-17%) fell due to threat of strikes in Norway’s oil industry, which could see a cut in 23% of the country’s production according to Bloomberg, citing public output figures.

 

Vistry Group (-12%) reported interim earnings. The UK housebuilder said it swung to a £12m loss in the first half of 2020, compared to a £73m profit at the same stage last year. The loss was partly the result of higher overhead costs resulting from the company’s acquisitions of Linden Homes and Vistry Partnerships. The group said the second half of the year had started well, with sales 20% ahead of prior year and a forward sales position of £2.7bn. It added that full year pre-tax profit is expected to be £130m-£140m, but this was slightly below consensus estimates.

 

There was similarly little news for the biggest movers in the short book. One highlight was a cloud-based software company, which missed market forecasts for its second quarter earnings and third quarter outlook, resulting in a sharp share price fall.

 

Performance since launch* (%)

 

LESEF September 2020 Performance

 

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

 

 

Sep-20

Sep-19

Sep-18

Sep-17

Sep-16

Liontrust GF European Strategic Equity
A4 Acc EUR

-14.9

3.0

2.6

5.2

0.7

MSCI Europe

-7.8

5.7

1.5

16.3

1.8

HFRX Equity Hedge EUR

-2.4

-3.5

-1.1

5.8

-1.3

 

*Source: Financial Express, as at 30.09.20, 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).

 

For a comprehensive list of common financial words and terms, see our glossary here.

 

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. 

Disclaimer

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 14, 2020, 12:35 PM