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Liontrust GF European Smaller Companies Fund

September 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 A3 share class returned -7.9%* in euro terms in September. This Fund’s target benchmark, the MSCI Europe Small Cap Index, returned -10.9%.

 

In the second hike of its tightening cycle, the European Central Bank opted for a larger move of 75 basis points, taking its deposit rate to 0.75%. ECB President Christine Lagarde commented that there would be several further rate rises as it looks to bring inflation back towards its 2% target. With eurozone CPI still sitting at 9.1% in August, markets are currently pricing in a peak policy rate of 2.5%.

 

The US Federal Reserve lifted rates by the same margin, taking them to a target range of 3.0% to 3.25%. Coming in the aftermath of a higher-than-expected inflation reading of 8.3%, the decision was accompanied by comments from Fed Chair Jay Powell on the necessity for further hikes and the likelihood of economic slowdown.

 

Global geopolitical tensions remained extremely elevated, with Putin beginning the process of annexing four regions in south-east Ukraine following referenda which were internationally condemned as illegitimate. This volatile backdrop and the prospect of more aggressive monetary tightening prompted a bout of risk aversion that ensured all sectors of the MSCI Europe index finished the month in negative territory.

 

Real estate (-17%) fell the most, with its UK constituents not helped by a UK government ‘mini-budget’ that was seen as damaging to the economy and property sector in particular after the Bank of England suggested the fiscal stimulus would trigger more rate rises to keep inflation in check. It was later forced to intervene in gilt markets, restarting buying operations after yields rose dramatically to cause a liquidity crisis for many pension funds. Within the Fund, Vistry Group (-25%) and Rightmove (-21%) were directly affected by forecasts of reduced UK property market activity as mortgage rates jumped.

 

Communication services (-11%), utilities (-9.1%), IT (-8.1%) and consumer discretionary (-7.9%) sectors all fell heavily amid broad-based weakness.

 

The overarching risk-off tone to markets ensured that the portfolio’s return profile in September was heavily influenced by top-down factors, with company newsflow taking secondary importance. Cyclical stocks had a particularly tough time, with Danish jeweller Pandora (-20%), UK promotional merchandise distributor 4imprint Group (-12%) and UK high street retailer WH Smith (-18%) among the weakest holdings.

 

With interest rate expectations moving higher over the month, the Fund’s financials showed some relative strength. Bankinter (+14%) and Bank of Ireland (+6.9%) were the top performers; only last month, Bank of Ireland upgraded its net interest income guidance based on higher benchmark interest rates. There were also good gains for Societe BIC (+15%), the French manufacturer of a range of consumer staples such as pens, razors and lighters.

 

Positive contributors to performance included:

Societe BIC (+15%), Bankinter (+14%) and Bank of Ireland (+6.9%).

 

Negative contributors to performance included:

Vistry Group (-25%), Rightmove (-21%), and Pandora (-20%).

 

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

 

Past performance does not predict future returns

 

 

Sep-22

Sep-21

Sep-20

Sep-19

Sep-18

Liontrust GF European Smaller

Companies A3 Acc EUR

-20.7%

59.1%

-1.9%

-6.7%

2.0%

MSCI Europe Small Cap

-26.9%

38.0%

0.2%

-1.8%

3.4%

 

 

*Source: Financial Express, as at 30.09.22, total return (net of fees and income reinvested).

 

**Source: Financial Express, as at 30.09.22, 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.

 

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. Details of the Fund's performance fee in the last financial year can be found in the Key Investor Information Document (KIID) which can be obtained free of charge from the Liontrust website.

 

Key Features of the Liontrust GF European Smaller Companies Fund: 

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.
5 years or more.
5 (Please refer to the Fund KIID for further detail on how this is calculated)

Active.
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.
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 guaranteedYou 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. 

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