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Liontrust GF SF Pan-European Growth Fund

Q3 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 4.5% over the quarter in euro terms, outperforming the MSCI Europe Index’s 0.7% (which is the comparator benchmark)*.

September was more volatile for European equities, ending a streak of seven consecutive positive months, with the Federal Reserve discussing a start to tapering in November, supply chain blockages, spiralling raw material prices, a new standoff over the US debt ceiling and concern around contagion from the collapse of debt-plagued Chinese property giant Evergrande.

We have never been keen to focus on short-term performance and Q3 highlights exactly why. Given our quality growth focus, the portfolio underperformed earlier this year with expectations of imminent rate hikes to control inflation resulting in a value rotation into more cyclically sensitive and optically cheaper companies. This reversed in July/August as the Fed indicated it would let the economy run hot without raising rates until late 2022 or 2023, refocusing markets on reliable growth and causing a fast move back into our favoured names.

More hawkish central banks in September drove another turnaround and a selloff in technology, however, and all this has been without any underlying change in the prospects for our selected companies. The market remains volatile and often disconnected from fundamentals in the short term, and we focus on long-term positive shifts in our economy and high-quality businesses driving, and benefitting from, these changes.

Over the quarter, top performers included Nagarro, a strong fit for our Increasing the resource efficiency of industry and agricultural processes theme, with this IT engineering business building software solutions for blue-chip clients such as BMW, Roche and McKinsey. The company released its first half-year report in August, announcing year-on-year revenue growth up 12.5% despite an overheated jobs market and the second wave of Covid-19 in India. While demand remained strong for its services, supply was significantly constrained by these disruptions but the company introduced various initiatives to keep recruiting what it calls Nagarrians and added more than 2000 in the first six months of 2021.

Another strong name was recent addition Lifco, held under our Providing affordable healthcare theme, which acquires small and medium-sized business in areas including dental materials and equipment. The company also released first-half results over the quarter, showing a 24.6% rise in net sales and 50% growth in pre-tax profits. The CEO said improvements in profitability are a result of organic growth, Lifco’s continual focus on margins, acquisitions, and continued low sales and marketing activities as a result of the pandemic, with earnings per share over the period also increasing 56.2%.

Elsewhere, Swedish investment platform Avanza has continued to perform well since we added the stock last year, announcing second-quarter numbers in July including a 43% rise in operating income and a 61% increase in profits. Over the period, the company passed milestones of 1.5 million customers and SEK 700 billion in savings capital, also ranking highest among banks and number four overall in Kantar Sifo’s reputation index 2021, meeting one of its sustainability targets for the year.

Trainline also had a strong quarter after a volatile period, buoyed by September results showing a recovery in the first half of the year as rail passengers return and increasingly shift to online and digital tickets. Group net ticket sales in Q2 recovered to 71% of same period in 2020, their highest level since start of the pandemic, and the company highlighted growth across its top four international markets, France, Italy, Germany and Spain. CEO Jody Ford said he is positive about long-term tailwinds for the industry, including the significant planned investment in rail capacity, particularly on high speed routes, and growing awareness of the environmental benefits of travelling by train versus less sustainable modes of transport.

ASML also remains among our best positions, although the shares were  caught up in the technology selloff at the end of September. This was despite the company increasing its financial forecasts for the next decade amid booming demand for its lithography systems, a key component for computer chip makers. The company predicts revenue growth of around 11% annually up to 2030 and estimates its revenue will hit €24-30 billion in 2025, with gross margins up to 55%.

Weaker names, in the context of more volatile markets and that tech selloff, included Spotify and Kone. Kone’s shares look to have been hit by the Evergrande situation and broader concerns about Chinese real estate, which is the key growth market for the Finnish lift and escalator company.

With Spotify, shares fell in July as the company reported lower-than-expected new user numbers in the second quarter, with the pandemic suppressing growth in markets such as India. Spotify added nine million monthly active users over Q2, bringing the total to 365 million, falling short of its own forecast as well as the market’s 372.5 million average estimate. We model growth slowing to a more mature 10% to 15% over the next five to 10 years in terms of new users but remain excited to see signs of monetising the audience, including news of an expansion into live events.

Hargreaves Lansdown was also among the detractors, with its shares falling after announcing lower profits for the year to end June, 3% down on the previous period. More positively, the company revealed assets under administration up 30% to more than £135 billion and a record number of new users, 233,000, bringing the total to more than 1.6 million.

Hargreaves warned recent growth in users may fall off as lockdowns ease but feels the younger mix of clients that remain, with 83% of new users below the age of 55, will drive future growth. This supports our long-term view of HL as a stock for our Saving for the future theme, with a huge rise in pension provision required to prevent a future shortfall in retirement funding.

Recent additions to the portfolio included American-Swiss medical device company Alcon, which specialises in design and manufacture of interocular lenses, consumables used in ophthalmic surgery and consumer contact lenses. The company has recently spun out of Novartis and is going through a period of reinvestment and renewed innovation, resulting in market share gains over the last 18 months and evidence of a strong, long-term orientated management team. Alcon is another business exposed to our Enabling innovation in healthcare theme, tackling the growing issue of vision impairment. Nearly a billion people have a preventable impairment and the company tackles this with both its products and its foundation, which spends roughly 1% of sales on treating this affliction in developing economies.

Another purchase was Topicus, a Vertical Market Software company that predominantly services European public sector customers in education, healthcare and local government. The company focus is on developing custom software to make the lives of educators, healthcare professionals and civil servants easier, with reducing error, duplication and generation friction positive for the economy, and we hold Topicus under our Better resource efficiency theme.

In terms of sells, we exited our position in Kerry Group after seven years. The company is exposed to our Delivering healthier foods theme, using its IP to improve the nutritional characteristics of our foods. We sold after our annual review as the share price now reflects our five-year assessment of intrinsic value; we were sad to say goodbye to this high-quality company dedicated to improving our food.

We also removed Schneider Electric, which provides products and services to manage electricity on the demand side, once it has been sold to the user. The company has a dominant market position in energy management and industrial automation and its success will be driven by the growth in electricity and demand for greater energy efficiency. Again, we recently reviewed the business and the current valuation reflects our assessment of intrinsic value.

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







Liontrust GF SF Pan-European Growth Fund
A1 Acc






MSCI Europe






*Source: Financial Express, as at 30.09.21, primary share class, in euro terms, total return, net of fees and income reinvested.

Understand common financial words and terms See our glossary

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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