Liontrust SF European Growth Fund

Q1 2018 review

The Fund returned -5.4% over the quarter, lagging the IA Europe ex-UK sector average of -4.4% and the MSCI Europe ex-UK Index’s -4.8%*.

After two strong years of equity performance, 2018 has thus far proven to be a tricky year for investors. Growth remains strong but rising inflation and fears we are beginning to move through the final part of this cycle have led to widespread selloffs.

Our process targets businesses that can grow structurally, driven by the shift towards a global economy that is more efficient, provides a higher quality of life and is more resilient.

Amid a difficult period for risk assets, the Fund’s top performer was French materials company Naturex. Naturex is a natural speciality chemicals business, which sources over 500 plants and botanicals from around the world to produce its ingredients solutions and sells these to the food & beverage, nutrition and health and personal care industries.

Naturex was identified in our Delivering healthier foods theme, with its ingredient solutions well placed to take advantage of structural growth towards natural ingredients, clean labels and supply chain traceability. Furthermore, the company's complex and vast supply chain acts a significant barrier to entry and provides it with strong bargaining power to protect margins. The company received a bid in March at a 42% premium to the share price from large flavour and fragrance company Givaudan.

Another strong performer was Netherlands-based company ASML, the world’s leading developer of high-tech lithography equipment to the global semiconductor industry with a dominant 75% market share. The company is investing heavily into the research and development of the next generation of lithography, using Extreme Ultraviolet (EUV) technology.

 

ASML’s technology is essential in increasing the computing power of semiconductor chips, while reducing the energy consumption. ASML was identified in our Improving the efficiency of energy use theme and we expect it to be a beneficiary of increasing semiconductor content in the rise of connected devices (Internet of Things) and the electrification of cars.

 

One of the Fund's newer holdings is German-based Hella, a leading player in lighting technology, electronics components and computer systems for the automotive industry. Hella is the industry leader in the manufacture of LED lighting for cars with 60% market share. The company continues to innovate with low energy and active safety lighting, which is used in premium cars and is then rolled out across the industry.

 

Hella reported strong results in the first quarter, especially in the automotive segment, with cash generation materially ahead of expectations. We continue to believe the company is well placed to benefit from the continual improvement in car efficiency and safety.

 

Among the weaker performers, Valeo had a difficult quarter as slowing growth in the second half of 2017 dented confidence in the company. We remain comfortable with our long-term thesis on this French company, which offers one of the widest ranges of smart sensors and features for automated driving, including autonomous emergency braking (AEB).

Speaking in the wake of its results in February, Valeo chief executive Jacques Aschenbroich said at least 10% of all vehicles sold in 2025 will be electric, doubling the group’s 5-6% internal forecast last year. Improving auto safety and Improving the efficiency of cars are key themes across our funds and we see this number as still on the conservative side given the drivers for change.

 

 

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

 


Mar-18

Mar-17

Mar-16

Mar-15

Mar-14

Liontrust Sustainable Future European Growth 2 Acc

4.5

24.7

1.6

6.2

17.0

MSCI Europe ex UK

3.0

27.2

-5.3

7.0

17.0

IA Europe Excluding UK

5.6

23.7

-1.8

6.9

17.4

Quartile

3

2

1

3

3


*
Source: Financial Express, as at 31.03.18, primary share class, 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 issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

Investment in the Fund involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates.

Disclaimer

This content 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy.  It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. 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.

Tuesday, April 24, 2018, 4:23 PM