Liontrust GF European Smaller Companies Fund

The Fund’s A5 share class returned -2.3%* in euro terms in June. This Fund’s target benchmark, the MSCI Europe Small Cap Index, returned -0.5%.

Despite a mid-month wobble following a more hawkish than expected Federal Reserve statement, the MSCI Europe Index ended June higher, its fifth consecutive month of gains. The Federal Open Market Committee’s (FOMC) dot plot of members’ future interest rate expectations indicated that interest rates are forecast to start to rise in 2023, having previously been predicted to remain constant until 2024. Economic projections were optimistic, with the median estimate of GDP growth revised up to 7% for 2021 versus 6.5% in March, while core inflation is forecast to be 3% vs 2.2%. 

There was a sharp reversal of recent trends in equity market leadership, with growth outperforming value. The MSCI Europe Growth Index posted a return of 3.4% in euro terms while the MSCI Europe Value Index was flat. Given its value bias, this factor reversal weighed on the Fund’s returns.

From a sector perspective, healthcare (+6.8%), IT (+4.5%) and energy (+3.5%) were the best performing sectors, while financials (-2.4%) and utilities (-2.0%) were the only sectors to end lower.

The weakness in financial stocks weighed on the Fund, with Deutsche Pfandbriefbank (-14%) and Bank of Ireland (-14%) both among the heaviest fallers. The latter’s share price fell after the Irish government announced that it planned to sell part of its 13.9% shareholding in the company over a six-month period.

Belimo (+11%) was among the top gainers after the Swiss air-con actuator manufacturer said it expects to deliver a significant increase in sales and profit for the first half of 2021. The company saw consistently high demand across all of its regions, which it expects to result in a 10% year-on-year increase in sales over the period. This sales increase, in combination with reduced travel and marketing expenses, has bolstered profitability. The outlook is more uncertain for the full year with increases in price of raw materials and shortages of parts likely to see lower construction activity and longer lead times.

French electrical, heating, lighting and plumbing equipment distributor Rexel (+5.7%) also saw better-than-expected activity during the first half of 2021, benefiting from a favourable global environment. The company commented on accelerated demand for electrification and digitalization and has achieved market share gains during the period.

Knowit’s (-6.5%) shares edged lower after the company issued new shares, raising SKr500m. The proceeds will be used for proactive reasons as the digital consultancy bolsters financial flexibility to take advantage of future business opportunities in line with its growth plans.

Positive contributors to performance included:

Strabag (+13%), ISS (+13%) and Belimo Holding (+11%)

Negative contributors to performance included:

Deutsche Pfandbriefbank (-14%), Bank of Ireland (-14%) and Marks & Spencer Group (-11%).

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

*Source: Financial Express, as at 30.06.21, total return (net of fees and income reinvested). Non fund-related return data sourced from Bloomberg.

**Source: Financial Express, as at 30.06.21, 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.

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. 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. 

DISCLAIMER

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.