Liontrust SF European Growth Fund

Q2 2018 review

The Fund returned 4.2% over the quarter, outperforming the IA Europe ex-UK sector average of 3.8% and the MSCI Europe ex-UK Index’s 3.2%*.

Q2 has been a fairly volatile period for Europe, both politically and in terms of markets, with escalating fears of a global trade war weighing on sentiment.

April saw a strong rally after the correction in the first quarter but this faded in May in the face of weakening leading indicators, global trade tariffs and political upheaval in Italy and Spain. Trade war fears picked up a notch in June, with the US imposing tariffs by refusing to extend the eurozone’s exemption from 25% duties on imports of steel and 10% on aluminium.

In response, the EU introduced matching import duties on a range of US products, including steel and aluminium, farm produce such as sweetcorn and peanuts, bourbon, jeans and motorbikes.

Our process remains focused on high-quality companies with long-term sustainability drivers that should grow regardless of the economic or political backdrop but as ever, we are monitoring the situation on trade, as well as ongoing political volatility, for potential impacts on growth trends across Europe.

In terms of individual stock drivers, Kingspan was among the best performers over the quarter. The global leader in technology related to insulation panels and boards continues to deliver strong growth across the US and Europe and this is despite headwinds for overall construction markets coming from Brexit in the UK and weather issues in the US.

The importance of insulation as a means of cutting energy use in both commercial and residential construction, combined with Kingspan’s technological lead, underpin a business that continues to beat market expectations and can grow based on these two structural drivers.

Elsewhere, DNB had another good quarter and remains one of the Fund’s key contributors to returns and a core holding within the financial sector.

DNB is a Norwegian retail bank identified under our Increasing financial resilience theme and possesses the quality indicators we look for in banks including prudent lending practices, strong capitalisation and growing returns on equity. It is also highly correlated to the price of oil due to the makeup of the Norwegian economy, offering diversification for the fund.

DNB provided an earnings update at the end of April, revising down its previous loan loss guidance that proved to be overly conservative and detailing strong operating performance, which gives us confidence in the company’s ability to increase its share buyback programme.

Staying with financials, Danish bank Danske underperformed over the quarter, despite posting a rather unexciting Q1 earnings update. There has been increasingly unsettling news surrounding the investigation into alleged money laundering that took place in the Estonia branch. We have engaged with the company on multiple occasions, including a visit where we met the head of compliance, and felt reassured management had taken sufficient steps to minimise the risk of this happening in the future.

Our position in the company is currently under review as more information is being uncovered.

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








Liontrust Sustainable Future
European Growth 2 Acc






MSCI Europe ex UK






IA Europe Excluding UK













* Source: Financial Express, as at 30.06.18, 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.


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.

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Tuesday, July 24, 2018, 9:16 AM