Liontrust GF European Smaller Companies Fund February 2022 review | Insights

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 -6.1%* in euro terms in February. This Fund’s target benchmark, the MSCI Europe Small Cap Index, returned -3.9%.

European markets held firm for the first half of the month as more evidence of inflationary pressures fed through, but then slid as it became clear that Russia’s aggression towards Ukraine was going to culminate in an invasion rather than any diplomatic solution.

The market reaction to Putin’s announcement of an invasion on 25 February included a sharp rotation towards safe haven assets and defensive areas of the equity market. The implications for supply disruption to energy and other commodities drove a spike in prices: Brent crude oil jumped 11% to finish February at $100 a barrel while the Bloomberg Base Metals Index rose 6% and the Bloomberg Agriculture and Livestock Index gained 8%.

The Fund held one Russian stock at the start of February: London-listed steel producer Evraz (-47%). The holding was disposed of as the Russian invasion of Ukraine began.

The utilities (+1.8%) and healthcare (+0.6%) sectors were the MSCI Europe Index’s strongest areas in February as investors sought defensive exposure. Materials (+0.6%) also rose. The weakest sectors were cyclicals: finance (-8.1%), consumer discretionary (-7.4%), IT (-4.1%) and industrials (-3.2%)

The Fund felt the impact of weakness in cyclical sectors through double-digit percentage falls for retailers Marks & Spencer (-20%) and Forbo Holding (-11%), industrials goods companies Concentric (-19%) and IMI (-11%) and financials Deutsche Pfandbriefbank (-10%) and Impax Asset Management (-10%).

Market research firm Ipsos (+6.2%) and online property listings portal Rightmove (+3.3%) were among the portfolio’s brighter spots as they both released results that beat expectations. Ipsos achieved organic growth of 18% in 2021, a growth rate flattered by its comparison with a heavily lockdown-affected 2020. Compared with 2019, growth was still a healthy level of 10%. The company expects more growth in 2022, albeit at a lower rate. It commented that January performance was well ahead of its 2021 comparable and the company’s internal targets, but that it remains cautious as to how the rest of the year will play out. Rightmove recorded 5% revenue growth in 2021 compared with pre-pandemic 2019, with average revenue per advertiser growing 9% to £1,189 a month.

Positive contributors to performance included:

Ipsos (+6.2%), BW Offshore (+3.7%) and Rightmove (+3.3%).

Negative contributors to performance included:

Evraz (-47%), Marks & Spencer (-20%) and Concentric (-19%).

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

Past performance does not predict future returns

	Dec-21	Dec-20	Dec-19	Dec-18
Liontrust GF European Smaller Companies A5 Acc EUR	34.5%	7.2%	35.5%	-20.1%
MSCI Europe Small Cap	23.8%	4.6%	31.4%	-15.9%

*Source: Financial Express, as at 28.02.22, 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 objective & policy¹	The investment objective of the Fund is to achieve long term capital growth by investing primarily in European smaller companies. The Fund may invest in all economic sectors in all parts of the world, although it is intended it will invest primarily in equities and equity related derivatives (i.e. total return swaps, futures and embedded derivatives) in European companies (including the UK and Switzerland). The majority of the assets of the Fund (more than 85%) are expected to be invested in smaller companies (with a market capitalisation of less than 5 billion euros at the time of the initial investment). In normal conditions, the Fund will aim to hold a diversified portfolio, although at times the Investment Adviser may decide to hold a more concentrated portfolio, and it is possible that a substantial portion of the Fund could be invested in cash or cash equivalents. The Fund may use FX forwards to hedge the Fund’s currency exposures. The Fund has both Hedged and Unhedged share classes available. The Hedged share classes use forward foreign exchange contracts to protect returns in the base currency of the Fund.
Recommended investment horizon	5 years or more
Risk profile (SRRI)²	6
Active/passive investment style	Active
Benchmark	The Fund is considered to be actively managed in reference to MSCI Europe Small -Cap Index net total return (the “Benchmark”) by virtue of the fact that it seeks to outperform the Benchmark. However the Benchmark is not used to define the portfolio composition of the Fund and the Fund may be wholly invested in securities which are not constituents of the Benchmark.

Notes: 1. As specified in the KIID of the fund; 2. SRRI = Synthetic Risk and Reward Indicator. Please refer to the KIID for further detail on how this is calculated.

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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.

Disclaimer

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.