Liontrust Assessment of Value Report - Flipbook - Page 96
Liontrust European Growth Fund
The Fund has been managed since launch in November 2006
by James Inglis-Jones, and he was joined by Samantha Gleave in
2012. The Fund aims to deliver capital growth over the long term
(5 years or more) by using the Cashflow Solution process to identify
and invest in companies incorporated, domiciled, listed or which
conduct significant business in the EEA (European Economic Area)
and Switzerland. The Fund has an equally weighted portfolio.
Performance
Overall value
assessment
We have evaluated the
Fund against all seven
criteria in our assessment
of the value it provides to
investors. While the Fund
has received an Amber for
comparable market rates,
we have concluded that
the Fund has performed
in line with expectations
for the remaining criteria,
delivering overall value to
investors including through
the investment performance.
Go back to the Summary
of the Assessment of
Value table
We have assessed the investment performance of the Fund against both its
stated investment objective, as well as against the benchmarks that are set out
in its prospectus. We considered whether the Fund has performed how we and
investors would expect it to, given the market conditions it has been operating
under, and its investment philosophy, strategy and process.
The Fund has returned 85.7% (institutional, income class), ahead of the 65.3%
return from the MSCI Europe Index and 66.5% from the IA Europe ex-UK sector,
both of which are comparator benchmarks.*
The Cashflow Solution is a flexible investment process. The fund managers
expect the investment process to perform well in a variety of different market
conditions. Over the last 5 years the performance of the fund has been strong
including over the recent market disruptions due to the Covid-19 pandemic.
For several years prior to the pandemic, the investment process was leading the
managers to prefer companies with strong cash flow growth prospects rather
than those with value credentials. As a result, the Fund had a long-standing
negative exposure to value as an investment style. Instead, it owned a number
of stocks that would be characterised as quality growth stocks that looked
expensive on conventional valuation measures but were attractive owing to their
tremendous cash generation.
As equities fell heavily in early 2020 due to the impact of lockdown measures,
cyclical value stocks in sectors such as autos, travel, financial were hit hardest
due to their very uncertain trading outlook. However, the Cashflow Solution
investment process was giving a clear message that, rather than fleeing the
value space, the fund managers should actually be embracing the risk found in
these much-maligned stocks.
Stockmarkets had slipped to very cheap levels and investor anxiety had surged
to levels that had only been surpassed during the global financial crisis and
technology bubble, episodes which set the stage for powerful value rallies.
The team’s analysis showed that the best approach to deploy in this environment
was to buy the very cheap stocks that have been shunned by investors, even
though at the time this felt very uncomfortable. Specifically – and as classified
by their proprietary stock designations – they invested in ‘Contrarian Value’ or
‘Recovering Value’ opportunities. These groups include companies that were
responding to tough trading conditions with measures such as the imposition of
capital controls, asset disposals and other restructuring measures.
This approach has worked very well since it was implemented. With the value
dislocation between expensive growth stocks and cheap value stocks still at
unprecedented levels, the managers believe that the value rally can deliver
further good returns for the Fund.
This document is intended to be for information purposes only. It is not
marketing material.
*Source: Financial Express, as at 31.08.21, total return, bid-to-bid, net of fees, income reinvested.
96 - Liontrust Assessment of Value Report