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Liontrust SF European Growth Fund

Q2 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 returned 7.3% over the quarter, underperforming the 7.7% from the MSCI Europe ex-UK Index but outperforming the 7.1% IA Europe ex-UK sector average (both of which are comparator benchmarks)*.

Overall, European markets continued to perform well, with solid economic data and assurances from the European Central Bank (ECB) of ongoing support enough to offset higher inflation concerns. Surveys of purchasing managers show euro-area activity growing at the fastest pace in 15 years, with companies struggling to keep up with demand and prices surging. ECB President Christine Lagarde acknowledged this pickup and is another in the temporary inflation spike camp, rather than a recovery-endangering cause for concern, with the Bank opting to continue its elevated pace of monetary stimulus for now.

Against this backdrop, as always, we believe a well-diversified portfolio of high quality businesses with multiple thematic drivers is the best way to navigate whatever macroeconomic developments emerge. The recovery in more cyclical sectors of the market continues and, as a consequence of our growth and quality focus – with higher inflation expectations also typically having a greater impact on longer duration stocks – the Fund lagged the peer group over the quarter. We remain confident our process of investing in high-quality, high-return businesses with a tailwind from enabling a cleaner, healthier and safer economy will continue to produce superior results over the long term. These businesses tend to wield strong pricing power, which is the best way to deal with inflation.

Over the period, Q1 addition Lifco was among the best contributors, buoyed a recovery in a number of its more cyclical business as well as an increase in the pace of acquisitions. Held under our Providing affordable healthcare theme, the company acquires small and medium-sized businesses in areas including dental materials and equipment. Lifco has proved an excellent home for prospective business owners looking to sell and with four new deals in June alone, management shows no signs of slowing. Through a combination of organic and inorganic growth, plus modest improvements in operating margins, we believe it should compound earnings in excess of 10% over the next five years.

Private markets investor Partners Group has also seen its shares rising on the back of a similar flow of deals, recently taking a significant minority stake in logistics business Apex International and a controlling stake in Dimension Renewable Energy, for example.

Puma had a strong quarter after announcing encouraging Q1 sales and profitability growth, despite ongoing lockdown restrictions and supply chain constraints due to port congestion in the US. Sales were up 25.8% despite around 30% of stores in Europe and Latin America closed and the remaining 70% severely restricted – which the company said is testament to the momentum behind the brand. Looking to the rest of 2021, Puma expects to achieve full-year sales growth in the mid-teens and significantly better profitability compared to 2020. We believe the Puma management team are proving themselves to be one of the strongest in the industry.

Other top contributors included Q1 addition Nagarro, an IT engineering business spun out from German tech company Allgeier. With a business model to build software solutions for blue-chip clients such as BMW, Roche and McKinsey, Nagarro helps them save time and money and improve their customer experience. This is a good fit for our Increasing the resource efficiency of industry and agricultural processes theme and we also highlight the strong culture, with effective management of the human capital that makes this business stand out among peers. Nagarro was one of four small caps promoted to the SDAX index in June, just six months after being listed on the exchange, sparking an all-time high in the shares.

Elsewhere, familiar names such as SAP, Cellnex, ASML and Roche itself remain among our top positions, with the latter’s shares rising since the company announced solid Q1 results at the end of April. Amid the usual flurry of approvals, Roche revealed the FDA has granted emergency use authorisation for its arthritis drug Actemra/RoActemra for treatment of Covid-19 in hospitalised adults and pediatric patients aged two and above.

CTS Eventim also had solid quarter, despite having to report overall group revenues down more than 80% for 2020 at the end of March. As we have highlighted in previous commentaries, a backdrop of widespread lockdown is clearly challenging for a live events business, but CTS has managed its way through the crisis prudently, adjusting costs, limiting investment and deciding against distributing a dividend for 2019. Its financial position remains robust, with cash and equivalents of €741 million at the end of 2020, and the company stressed it never experienced any kind of shock paralysis. Our thesis is that underlying demand for events remains undiminished and echoing this, Eventim CEO Klaus-Peter Schulenberg said that where vaccine rollout is more advanced, such as the UK and Israel, people’s longing for culture and live entertainment is clear. As CTS Eventim’s share price has rallied beyond our five-year target and estimate of intrinsic value, however, we have sold our position in the company and the business returns to our watchlist.

Among weaker performers, National Express continues to struggle amid Covid-related restrictions although is obviously expecting a robust improvement in the second half of the year as vaccination efforts allow counties to open up. The company has been a solid performer since we added it to our European portfolios under our Making transport more efficient theme in Q4 and while the shares have flattened recently, we believe it is well set to take market share from weakened competition and an accelerated shift to outsource more transport services. The environmental advantages of public transport are an important factor in reducing emissions, which, along with urbanisation, should also boost growth longer term.

Infineon has also seen its shares drop off slightly despite reporting strong results in the midst of a global shortage of computer chips, with the pandemic upending supply chains and changing consumer shopping patterns. Carmakers, a key audience for Infineon, initially cut back orders for chips while tech companies, whose products were boosted by lockdown, bought as many as they could. Infineon reported higher net profits and revenue for the second quarter of fiscal year 2021 as demand for semiconductors continues to exceed supply. CEO Reinhard Ploss noted a ‘booming’ semiconductor market, with supply constraints in its automotive segment only expected to ease in the second half of this year and lost volumes only likely to be made up in 2022.

Unifiedpost is among our holdings facing a more challenging short-term backdrop as a newly listed technology business amid the value rotation, despite announcing strong performance over the first quarter. After an intense acquisition period, the company said it is now fully focused to maximise the value of its platform and the scale of its business network and, while 2021 is considered a ‘construction year’, it is on track to deliver on future growth plans. The company is exposed to our Improving the resource efficiency of industrial and agricultural processes theme, focusing on digitising business administration and payments. Around 95% of documentation between European businesses is still paper based, which is slow, subject to error and has a significant environmental footprint, and this company’s software allows companies to cut down paper, time, money and fraud. Despite recent share price weakness, we remain confident in the long-term prospects, having met with the management team twice over the past six months.

Over the period, we took the opportunity to start a position in Zur Rose Group under our Providing affordable healthcare theme and it has had an encouraging start in the portfolio as one of our strongest performers. This Swiss business is Europe’s leading online pharmacy and telemedicine company with over 11 million customers across Northern countries (mainly Germany and Switzerland). Its online pharmacy offers OTC drugs and personal care products delivered directly to customers.

With a liberalisation of European pharmacy markets and competition regulations, Zur Rose is expanding into prescription medicine and telemedicine appointments with doctors, which has dramatically increased its addressable market. Its products are priced at a 10-40% discount relative to bricks and mortar equivalents, made possible via scale purchasing agreements and lower fixed cost advantages. The company is aiming to build a comprehensive digital healthcare portal under a single brand and app, which can be rolled out through Europe, as countries look to reduce the cost of healthcare.

We bought in after a bout of share price weakness during the value rotation and it had a stronger rest of the quarter, having reported sales growth of 16% in April and a range of enhancements to its DocMorris healthcare platform. With the mandatory introduction of electronic prescriptions in Germany from next year, Zur Rose is well positioned with 9.8 million customers in this market and DocMorris the country’s best-known pharmacy brand. According to a 2018 study by McKinsey, Germany could save €34 billion in digitising its healthcare system and Zur Rose is a critical technology player in this transition.

Another new addition was Qiagen, this time under the Enabling innovation in healthcare theme, a German provider of sample and assay technologies for molecular diagnostics, applied testing, academic and pharmaceutical research. We continue to see innovation as the key driver in healthcare, with a massive step change required in technologies that help treat disease more effectively. Companies like Qiagen continue to drive down the cost of understanding the human genome, allowing experts to tailor therapies more precisely to individual needs and with fewer side effects, and thereby reducing the burden on the healthcare system.

Qiagen provides molecular diagnostics technologies for use in the clinical and life science sectors, allowing its customers to unlock insights from the building blocks of life – DNA, RNA and proteins. We have identified molecular diagnostics as one of the fastest-growing areas in healthcare and the company has an established position as the premium provider of sample technologies in this space.

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 30.06.21, primary share class, total return, net of fees and income reinvested.

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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. The majority of the Liontrust Sustainable Future Funds have holdings which are denominated in currencies other than Sterling and may be affected by movements in exchange rates. Some of these funds invest in emerging markets which may involve a higher element of risk due to less well-regulated markets and political and economic instability. Consequently the value of an investment may rise or fall in line with the exchange rates. Liontrust UK Ethical Fund, Liontrust SF European Growth Fund and Liontrust SF UK Growth Fund invest geographically in a narrow range and has a concentrated portfolio of securities, there is an increased risk of volatility which may result in frequent rises and falls in the Fund’s share price. Liontrust SF Managed Fund, Liontrust SF Corporate Bond Fund, Liontrust SF Cautious Managed Fund, Liontrust SF Defensive Managed Fund and Liontrust Monthly Income Bond Fund invest in bonds and other fixed-interest securities - fluctuations in interest rates are likely to affect the value of these financial instruments. If long-term interest rates rise, the value of your shares is likely to fall. If you need to access your money quickly it is possible that, in difficult market conditions, it could be hard to sell holdings in corporate bond funds. This is because there is low trading activity in the markets for many of the bonds held by these funds. Mentioned above five funds can also invest in derivatives. Derivatives are used to protect against currencies, credit and interests rates move or for investment purposes. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions.


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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