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Liontrust GF European Smaller Companies Fund

February 2021 review
Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

The Fund’s A5 share class returned 5.1%* in euro terms in February. This Fund’s target benchmark, the MSCI Europe Small Cap Index, returned 3.9%.


President Biden’s US$1.9 trillion plan fuelled investors’ inflation expectations and sparked a sharp rise in sovereign bond yields. The US 10-year yield rose 45 basis points to its highest level for a year. Biden’s fiscal plan passed through the US House of Representatives late in the month and if passed through the Senate, it would add to the already record amounts of stimulus from central banks and governments around the world. Moreover, the global vaccination efforts could mean economies open up once again in the near future, which would further add to the inflationary pressures.


The consequence for the equity market was a strong run for value stocks. Rising bond yields has a significant impact on the valuations of growth stocks who by definition are long duration assets: valuation models for growth stocks are very sensitive to a rising discount rate of their future assumed high growth. Value stocks by contrast are short duration whose profits are much more likely to benefit from a pick-up in inflation owing to the beneficial effects of inflation on pricing power. In February, the MSCI Europe Value Index rose 4.5% in euro terms, compared to the MSCI Europe Growth Index’s 0.5% rise. Given the Fund’s current value bias, this was a boon to performance.


On the sector front, financials (+11%) was the best performer in the MSCI Europe Index, followed by energy (+10%) and consumer discretionary (+5.4%). The Fund is overweight the consumer discretionary sector where Elior Group (+29%) and WH Smith (+27%) were the stand-out performers, while Tethys Oil (+21%) benefited from the energy rally. Some of the more defensive, bond proxy sectors were among the heaviest fallers, such as utilities (-5.9%), consumer staples (-3.9%) and health care (-3.1%).


Temporary power company Aggreko (+39%) was the biggest gainer after confirming that it had been approached by TDR Capital and I Squared Capital for an 880p per share acquisition deal. The price represented a 39% premium to Aggreko’s shares at the time.


Market research company Ipsos (+21%) stated that like-for-like revenue should be higher in 2021 compared to 2020 and operating margins should rise as trends improved during the closing months of 2020. In the fourth quarter, organic growth returned to positive territory after declining 25% and 3.3% in quarters two and three respectively. This was particularly noteworthy given the strong comparable in Q4 2019. In the year as a whole, revenue declined 8.3% and organic growth was -6.5%.


There were a handful of companies that ended the month lower. Construction industry software company Nemetschek (-10%) fell despite in-line 2020 results. Revenue grew 7.2% to €597m compared to consensus estimates of €595m, and earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 4% to €172m versus the market’s forecast of €173m. Management anticipate a normalization of business conditions in 2021 and further growth.


Gaztransport & Technigaz (-7.7%) disappointed the market with its outlook for 2021. The specialist in liquified natural gas (LNG) containers for shipping and storage said consolidated revenue is expected to be between €285m and €315m, compared to €396m in 2020 while EBITDA is forecast to be €150m-€170m in 2021 versus €243m in 2020. The company cited higher staff costs as part of the reason for lower guidance.


SimCorp’s (-6.0%) shares fell following the release of its 2020 results. The investment software provider said order intake increased 16% year-on-year aided by 17 new client wins, but revenue remained flat at €456m and below consensus forecasts of €460m. For 2021, revenue is expected to grow between 6% and 11%.


Positive contributors to performance included:

Aggreko (+39%), Elior Group (+29%) and WH Smith (+27%).


Negative contributors to performance included:

Atoss Software (-14%), Nemetschek (-10%) and Knowit (-8.7%).


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






Liontrust GF European Smaller Companies A5 Acc EUR




MSCI Europe Small Cap Index





*Source: Financial Express, as at 28.02.21, total return (net of fees and income reinvested). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 31.12.20, total return (net of fees and income reinvested). Discrete data is not available for five full 12 month periods due to the launch date of the portfolio. Investment decisions should not be based on short-term performance.

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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. Investment in Funds managed by the Cashflow Solution team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Liontrust European Growth Fund holds a concentrated portfolio of stocks, if the price of one of these stocks should move significantly, this may have a notable effect on the value of the respective portfolio. The Liontrust Global Income Fund's expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation. 


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.

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