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Liontrust GF European Smaller Companies Fund

January 2022 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 -5.4%* in euro terms in January. This Fund’s target benchmark, the MSCI Europe Small Cap Index, returned -6.8%.


In early January, minutes from the US Federal Reserve’s December meeting served notice of its intention to raise rates sooner and faster than had been expected and to scale back its balance sheet. After data showed that US consumer price inflation rose to 7%, Fed Chair Jay Powell later confirmed that the Fed would plan to raise rates in March and finish quantitative easing in the same month. Vitally, he also indicated – or refused to rule out – the possibility of raising rates at every policy meeting in 2022 or raising rates by increments greater than 25 basis points.


While bond yields rose, the effect of higher rate expectations on equity markets was to further catalyse the rotation from growth to value. The MSCI Europe Value Index outperformed the MSCI Europe Growth Index by 12 percentage points in January. The value rally has now been in position long enough that momentum has migrated from high forecast growth stocks to value stocks – a meaningful signal of regime change.


The valuation dislocation in markets currently is very significant, and we think there is still more to come from the value rally as it evolves in nature.


The value rally towards the end of 2020 was a fairly indiscriminate deep contrarian value rally, as a number of stocks had become oversold on Covid-19 concerns. But this transitioned during 2021. We now think it is preferable to invest in cheap stocks where there is clear evidence of recovery – as distinct from a deep value stock where there is no evidence of recovery. As a result, we have shifted the emphasis of our stock selection from the contrarian value secondary score towards the other three scores: recovering value, cash return and momentum.


While the Fund’s value tilt helped insulate it from some of the market weakness, there was also a size bias to returns that provided a significant headwind. In a risk-off environment, the MSCI Europe Small Cap’s -6.8% return significantly underperformed the MSCI Europe’s -3.2% return.


As would be expected in this environment, the largest detractors included those with some of the more ambitious growth profiles of the Fund’s holdings. UK sustainable asset manager Impax Asset Management (-26%) tumbled despite reporting good quarterly assets growth; ATOSS Software (-19%) fell in spite of a good set of 2021 results which included upgraded 2022 forecasts; and Rightmove (-18%) dropped without issuing newsflow.


Bank of Ireland’s (+20%) value credentials helped it top the Fund’s risers, although it issued no significant corporate news during the month. Retailer WH Smith (+12%) was another strong candidate for investors looking to buy into value plays, and its rally was helped by a trading update that showed more evidence of recovery from the pandemic. In the 20 weeks to 15 January, group revenues recovered to 85% of 2019’s pre-pandemic levels. Electricals and plumbing distributor Rexel (+10%) also issued an encouraging trading update, with better-than-expected Q4 activity driving an upgrade of 2021 guidance on revenues (15.3% growth versus 12% - 15% previously) and profit margins (6.2%, up from 5.7%).


Positive contributors to performance included:

Bank of Ireland (+20%), WH Smith (+12%) and Rexel (+10%).


Negative contributors to performance included:

Impax Asset Management (-26%), ATOSS Software (-19%) and Rightmove (-18%).


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


Past performance does not predict future returns






Liontrust GF European Smaller Companies A5 Acc EUR





MSCI Europe Small Cap






*Source: Financial Express, as at 31.01.22, total return (net of fees and income reinvested).


**Source: Financial Express, as at 31.12.21, total return (net of fees and income reinvested). Discrete data is not available for ten full 12-month periods due to the launch date of the portfolio (01.02.17). Investment decisions should not be based on short-term performance.


Key Features of the Liontrust GF European Smaller Companies Fund

Investment policy summary

The investment objective of the Fund is to achieve long term capital growth by investing primarily in European smaller companies

Allowable investment types

Equities. Financial Derivatives (Contracts for Difference, Futures, Embedded Derivatives, FX Forwards). Cash, near cash and cash equivalents. Collective Investment Schemes (including ETFs) up to 10% of the NAV of the Fund. For a full list of the types of investment allowable in the Fund please see the KIID/Prospectus.

Holding period

At least 5 years

Risk profile (SRRI)


Active/passive investment style



Target benchmark: MSCI Europe Small Cap Index


1.2% Ongoing Charges Figure (A5 class): 1.0% Annual Management Charge and 0.20% Fixed Admin Fee (as at 31.12.21). A Performance Fee for each Performance Period shall be equal to 10% of the amount, if any, by which the Net Asset Value before Performance Fee accrual of the Fund exceeds the Indexed Net Asset Value of the Fund on the last Business Day of the Performance Period. The Performance Period of the Fund is every 12 months ending on the last business day of each calendar year

Understand common financial words and terms See our glossary
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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