We have added Liontrust European Growth to The Adviser Centre as a Recommended fund.

Fund snapshot

This is a European equity fund managed with a focus upon cash flows and the forensic analysis of company reports and accounts.  It is bottom-up in nature and its composition changes through time in response to the managers’ objective assessments of company profitability.  Within its sector, the fund features in our ‘Larger-Cap, Blend’ category.  Please see our IA Sector Overview for more information.

Fund description - key points

• The fund is co-managed by James Inglis-Jones and Samantha Gleave.  Mr Inglis-Jones joined the firm in 2006 to develop the “Cashflow Solution” investment process.
• Philosophically, the managers believe that stock prices are frequently mispriced because they tend to reflect the forecasts of future profitability as determined by company management.  They argue that these forecasts can be unreliable.  Rather, they believe that the analysis of historic cash flows is a more reliable basis upon which to assess a company’s future profitability and stock price.
• The process involves the forensic analysis of historic cash flows and balance sheet development, as presented in a company’s report and accounts.  They do not use broker research or seek meetings with company management.
• The fund features between 30 and 50 positions and stocks are equally weighted.  An unusual feature is that the portfolio is typically rebalanced annually, with interim adjustments occurring in response to important developments.

Characteristics and utility

• There is no structural bias to growth or value, or to defensiveness or cyclicality.  The portfolio evolves through time according to the managers’ objective stock analysis.
• Market cap-wise, the equally weighted portfolio structure results in a greater emphasis on medium-sized companies when compared to the index.
• Given these distinctive attributes, portfolio positioning and outcomes can differ markedly from the benchmark.  In particular, the fund has a history of fallow periods of relative performance, followed by stronger phases as attractive cash flow fundamentals are reflected in stock prices.
• The fund is suitable for investors who appreciate the clarity and diligence of the approach, as well as its low turnover.

To view our full factsheet, please visit the fund page.