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Liontrust GF European Smaller Companies Fund

August 2021 review

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.

The Fund’s A5 share class returned 2.6%* in euro terms in August. This Fund’s target benchmark, the MSCI Europe Small Cap Index, returned 3.5%.


Nothing changed in the macroeconomic backdrop during August to disturb the steady uptrend in equity markets that stretches back to March 2020. Global Covid-19 cases continue to rise, posing a threat to the economic recovery from last year’s lockdown measures, and central banks remain in the spotlight as commentators speculate as to when the pickup in inflation might prompt some tightening of policy.


On the latter front, the biggest talking point was the speech given by Federal Reserve Chair Jay Powell to the Jackson Hole economic symposium, staged as an online-only event this year. While suggesting that the Fed is on course to reduce its monthly asset purchases by the end of the year, he also noted that this tapering should be viewed independently of interest rate rises, the timing of which will be dependent on separate criteria. Investors digested this message without any noticeable damage to the prevailing bullish sentiment. 


Equity market strength was fairly broad-based. Of the MSCI Europe Index’s 11 industries, only consumer discretionary (-2.6%) finished in negative territory in euro terms. IT (+6.9%), utilities (+4.1%) and healthcare (+3.5%) were the largest risers.


Within the portfolio, the strongest riser was Marks & Spencer (+32%) which enjoyed a strong rally after bumping up its full-year financial guidance. Assuming that no new Covid-related trading restrictions are imposed, it now expects adjusted profit before tax for FY2022 to exceed the upper end of its previous guidance range of £300m-£350m. In the 19 weeks to 14 August 201 food revenue was up 9.6% compared with the pre-pandemic level in 2019/20 while Clothing & Home sales have almost doubled on last year’s level to sit only 2.6% lower than the 2019/20 comparable. Marks & Spencer credits this to a combination of pent-up consumer demand and the beneficial impact of its business transformation plan.


Bank of Ireland (+19%) reported on a strong recovery in business performance which saw operating profit of 465m in the first half of the year, up 72% on last year’s level and 7% higher than 2019. The result reflects increases in net interest income and business income, a reduction in costs, and a negligible net impairment charge after minimal loan losses. The outlook for the rest of the year is bright with 5% income growth expected in the second half compared to the first six months.


As a geotechnical contractor, Keller Group (+14%) has suffered from the slowdown in global construction brought about by the pandemic. However, August’s interim results suggest the contraction in activity has not been as severe as some investors feared, prompting a jump in the share price. Although underlying operating profit slid 18% to £40m in the half-year to 27 June, Keller says it is on course to materially exceed its previous expectations for the full year. In a sign of recovery of activity levels in key markets such as North American and Europe, its order book rose 11% to a record level of £1.2bn.


A higher oil price (up 28% compared with Q1) and lower operating expenses allowed Tethys Oil (-11%) to record large increases in Q2 EBITDA and free cash flow, but relatively muted production levels and a disappointing key drilling update dampened the tone of the update. Net daily production fell from 11,585 barrels per day in Q1 to 11,030 in Q2. The results of its Thameen-1 exploration well in Block 49 in Oman recorded no flows, despite promising earlier assessments.


Shares in Pandora (-6.7%) slid despite a Q2 update which showed more progression of positive trends, possibly indicating some profit taking following a very strong run. Organic sales growth was 84% compared with 2020 and 13% versus 2019. On average 15% of physical stores were temporarily closed during the quarter, falling to 8% by August. Sales growth has been led by its US and online operations.


BW Offshore (-7.2%) slid after reporting an 18% drop in EBITDA following the lay-up and transportation of two of its key FPSO (floating production and storage and offloading) vessels.


Positive contributors to performance included:

Marks & Spencer (+32%), Bank of Ireland (+19%) and Keller Group (+14%).


Negative contributors to performance included:

Tethys Oil (-11%), BW Offshore (-7.2%) and Concentric (-7.0%).


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 31.08.21, 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.

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Key Risks 
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
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. Some of the Funds may invest in derivatives. The use of derivatives may create leverage or gearing. A relatively small movement in the value of a derivative's underlying investment may have a larger impact, positive or negative, on the value of a fund than if the underlying investment was held instead. Some of the funds may hold 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.


This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 
This 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust. Always research your own investments and if you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 

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