Liontrust GF SF Pan-European Growth Fund

Q1 2020 review

The Fund returned -15.6% over the quarter outperforming the MSCI Europe Index’s -22.6*.

Markets came into 2020 buoyant with positive news of a potential trade deal between the US and China and resolution of the Brexit negotiations. These two issues had dominated headlines and sentiment for the previous few years – and there were only rumblings of a viral outbreak in China.

Three months later and we are in unprecedented territory, with cities locked down, millions working from home, unemployment rising and volatility hitting historic highs in the markets.

Governments around the world are now facing the decision of when to lift lockdown measures, weighing the immediate risks to life against longer-term economic and social costs. These decisions will not be simple or uniform given the disparate nature of societies around the world and impacts of the virus. However, governments have been unified in their reaction to the crisis with swift and substantial monetary and fiscal stimulus. These measures have helped ease some of the impact of lost earnings and provided some reassurance to markets.

That said, this is a unique and dynamic crisis, with no contemporary examples to use a guide. Ultimately, we are long-term optimists and believe we will reach a new normal at some point, overcoming this challenge as we have others in the past.

Instead of predicting how and when the market will recover, our process focuses on the structural shifts to a more sustainable economy. Our emphasis is on trying to understand the ongoing positive changes that will make our society healthier and safer and preserve our environment. Our process identifies high-quality companies with strong processes in place to manage customer relationships, employees and supply chains as we have long believed outperformance on these social issues will deliver more resilient businesses over the long term.

It is important to note that crises often accelerate some of these changes that have already been in action for many years and this is happening across many of our themes.

Our Connecting People theme has seen a marked acceleration over the last few months for example, as people work from home and stay connected with friends and family digitally. We had long recognised the growing demand for more digital communication as we become more connected as a global society, increase our data consumption, and become aware of the environmental impacts of travel.

Companies such as Cellnex and TeamViewer enable more seamless digital connection and remote working and we believe the increased demand witnessed recently for their products is not transient but the beginning of a more permanent shift in our communication habits. Helios Towers was also among our stronger names, with the company benefiting from the world’s growing data needs.

Helios reported revenue growth of 9% over 2019 and the company has now delivered 20 consecutive quarters of adjusted EBITDA growth. In 2020, and beyond, CEO Kash Pandya said the company will continue to focus on exciting growth in its sub-Saharan markets, long-term client contracts and sustained improvements in operational excellence.

Within our Enabling innovation in healthcare and Providing affordable healthcare globally themes, companies such as Roche and Grifols continue to provide important treatment for the COVID-19 virus and other diseases. A more long-term consequence of this crisis may be to increase the investment into treatments and healthcare infrastructure as governments realise the need to have a more resilient and prepared system.

Overall, while the portfolio has clearly been hit by often indiscriminate selling, we have benefitted from having no exposure to hard-hit sectors such as oil, airlines and hotels.

From a positioning perspective, our long-term strategy has demonstrated reassuringly strong relative performance year to date and over the longer term, with a broad contribution from across sectors, particularly in industrials and communication services.

We do not expect to make drastic changes to the strategy in terms of companies or sector positioning but have taken tentative steps to increase exposure to high-quality businesses that we believe will benefit from an economic recovery at some point.

While we remain cautious on any major trading with such low visibility on future earnings, we continue to look for opportunities. At the margin, we have reduced defensive names that have been stronger year to date and topped up certain stocks that are positioned well for the next five years. This has included reducing Roche and adding small amounts to Puma and Smurfit Kappa.

Beyond that, our focus on holdings across the portfolio has been twofold: first, have the prospects changed five and ten years from now and second, how are companies positioned for the next six to 12 months in terms of cash position and ability to flex down the cost base and access debt facilities?

Basic-Fit is a good example: Europe’s largest low-cost gym operator is facing a period of zero revenues with so many countries in lockdown and therefore, as would be expected, has been one of our weaker performers over Q1.

Looking long-term, we believe long-term demand for low-cost fitness is undiminished and may even be bolstered after a period of lockdown as people look to reduce their expenditure. We have spent time speaking to the management team, discussing the measures they have taken to cut costs and adapt their service to provide fitness instruction at home for members. We believe Basic-Fit can emerge stronger than small independent peers or even large highly levered competitors, with the advantages of a €20 flexible monthly membership clear in straitened economic times.

In the majority of cases, we remain confident in the long-term prospects for our companies and have been in contact with nearly all of the management teams to understand how they are dealing with these challenging times. While the reality of the current situation is well understood, our meetings continue to demonstrate businesses showing guarded optimism: Befesa for example has been able to re-open construction on its China plants.

We have also taken the opportunity to add two new stocks to the portfolio during the selloff, including Europe’s largest ticketing company CTS Eventim. The company enables the shift towards a more experience-based economy, away from material consumption.

In the UK, we have invested in Softcat, a leading information technology company that helps SMEs guard against cyber threats and become more efficient by advising on the best technology solutions.

Softcat released a solid performance update over the quarter, reporting a rise in average gross profit per customer of 12.2% over six months to 31 January and said clients are coming to the company for advice across an increasingly broad range of technology and services. CEO Graeme Watt said the company is yet to see a material impact from the ongoing COVID-19 outbreak and given the strength of its business model, lack of bank debt and strong cash position, is confident in its ability to continue to build market share and drive profitable growth over the longer-term.

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







Liontrust GF SF Pan-European Equity Fund






MSCI Europe







*Source: Financial Express, as at 31.03.20, primary share class, in euro terms, total return, net of fees and income reinvested.


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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. The majority of the Liontrust Sustainable Future Funds have holdings which are denominated in currencies other than Sterling and may be affected by movements in exchange rates. Some of these funds invest in emerging markets which may involve a higher element of risk due to less well-regulated markets and political and economic instability. Consequently the value of an investment may rise or fall in line with the exchange rates. Liontrust UK Ethical Fund, Liontrust SF European Growth Fund and Liontrust SF UK Growth Fund invest geographically in a narrow range and has a concentrated portfolio of securities, there is an increased risk of volatility which may result in frequent rises and falls in the Fund’s share price. Liontrust SF Managed Fund, Liontrust SF Corporate Bond Fund, Liontrust SF Cautious Managed Fund, Liontrust SF Defensive Managed Fund and Liontrust Monthly Income Bond Fund invest in bonds and other fixed-interest securities - fluctuations in interest rates are likely to affect the value of these financial instruments. If long-term interest rates rise, the value of your shares is likely to fall. If you need to access your money quickly it is possible that, in difficult market conditions, it could be hard to sell holdings in corporate bond funds. This is because there is low trading activity in the markets for many of the bonds held by these funds. Mentioned above five funds can also invest in derivatives. Derivatives are used to protect against currencies, credit and interests rates move or for investment purposes. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions.


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, April 17, 2020, 4:41 PM