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Liontrust European Dynamic Fund

July 2023 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 2.2%* in sterling terms in July. The MSCI Europe ex-UK Index comparator benchmark returned 1.7% and the average return made by funds in the IA Europe ex-UK sector, also a comparator benchmark, was 2.1%.


Global equity markets rallied in July, helped by expectations that a peak in monetary policy may finally be close. The big development in this regard was consumer price inflation data in the US which came in below expectations, raising hopes that this month’s 25 basis point rise to a 5.25% - 5.50% range from the US Federal Reserve could be the last of this cycle.


While the Fed had previously paused its rate hike schedule in June and commented that future increases would be data dependent, the European Central Bank was slower to start its tightening cycle and has stayed relatively hawkish in its rhetoric until recently. As widely expected, the ECB raised deposit rates by 0.25% to 3.75% in July, a level not reached since 2001. ECB president Christine Lagarde said that the bank is now keeping an open mind on the future direction of hikes, with the possibility of a hike or a pause in September. Markets are, however,  betting that the peak in the European cycle has already been reached.


As sentiment picked up, the real estate sector led the MSCI Europe ex-UK index’s gain, posting a 12% rise, followed by energy (+4.9%), finance (+4.5%) and materials (+4.5%).


In a reversal of the year-to-date trend, technology was weak, losing 1.3%, while utilities (-0.8%) and consumer staples (-0.3%) also lost a small amount of ground. So far this year, the technology sector has gained 21% in sterling terms, behind only consumer discretionary (+22%).


One of the Fund’s strongest stocks in July was Mediobanca (+10%). Its full-year results came in ahead of expectations, with 22% growth in net interest income to 1.8bn helping drive revenues to 3.3bn. In line with its 2019 – 23 strategic plan, the bank plans a €0.85/share dividend – a 70% payout ratio. In keeping with its new strategic plan running from 2023 to 2026, it will also conduct a share buyback scheme amounting to €200m, around 2% of its share capital.


Although reported sales fell 2.1% to 25bn, like-for-like sales at Compagnie de Saint-Gobain (+10%) grew 1.6% in like-for-like terms in the first half of 2023. Operating income growth of 1.0% was helped by an expansion in margins from 11.0% to 11.3%. Investors welcomed upgraded full-year guidance – the company now expects to achieve a double digit percentage operating margin, up from a range of 9% - 11% previously.


Half-year results from Heineken (-5.5%) showed 6.6% organic growth in net revenue to €17.4bn, with a 5.4% volume decline offset by a 12.7% pricing uplift. While this pattern was expected given the inflationary environment in most regions and Europe in particular, there was also softer-than-expected demand in its Asia Pacific division. Share price weakness reflected a 9% slide in adjusted operating profit to €1.9bn and a small downgrade in its outlook. Heineken now expects 2023 operating profit growth of mid-single-digit percentage, down from mid-to-high single digits previously. Some analysts think the downgraded guidance may still prove too ambitious given the trends in the first half of the year.


In 2022, Dassault Aviation’s (-3.8%) business jet division saw a spike in growth post-Covid but this is now easing off. Order intake was €1.6bn, compared with €16bn last year. Adjusted net sales of €2.3bn in the first half of the year was also down 25% on last year’s level. The company commented that supply chain issues have deteriorated again recently, impacting its aircraft production.


There were no updates on trading from Danish jewellery retailer Pandora (+11%) but shares in the company have strengthened since announcing the latest tranche of its buyback programme in June. Pandora had previously committed to buying back shares worth DKr5.0bn over twelve months. Its initial DKr2.4bn programme completed on June 19 so Pandora brought forward the start of its new DKr2.6bn programme, which will be completed prior to February 2024.


Positive contributors to performance included:

Pandora (+11%), Mediobanca (+10%) and Compagnie de Saint-Gobain (+10%).


Negative contributors to performance included:

Heineken (-5.5%), Dassault Aviation (-3.8%) and Evolution (-3.5%).


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

Past performance does not predict future returns








Liontrust European Dynamic

I Inc






MSCI Europe ex UK






IA Europe Excluding UK













*Source: Financial Express, as at 31.07.23, total return (net of fees and income reinvested), bid-to-bid, institutional class. Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 30.06.23, total return (net of fees and income reinvested), bid-to-bid, primary class.

Understand common financial words and terms See our glossary

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.

The Fund will invest in companies which are incorporated, domiciled, listed or conduct significant business in the EEA or Switzerland, but excludes shares listed in the UK.
The Fund will typically invest 95% (minimum 80%) of its assets in equities or equity related derivatives but may also invest in collective investment schemes (up to 10% of Fund assets), corporate debt securities, other transferable securities, money market instruments, warrants, cash and deposits.
The Fund is categorised 6 for its exposure to European (ex UK) equities.
The SRRI may not fully take into account the following risks:
– that a company may fail thus reducing its value within the Fund;
– overseas investments may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of the Fund.
This Fund may have a concentrated portfolio, i.e. hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the Fund's value than if it held a larger number of investments.
The Fund may, under certain circumstances, invest in derivatives, but it is not intended that their use will materially affect volatility. Derivatives are used to protect against currencies, credit and interest rate moves 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 use of derivatives may create leverage or gearing resulting in potentially greater volatility or fluctuations in the net asset value of the
Fund. 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. The use of derivative contracts may help us to control Fund volatility in both up and down markets by hedging against the general market.
The Fund may encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings.
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.
Outside of normal conditions, the Fund may hold higher levels of cash which may be deposited with several credit counterparties
(e.g.international banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash.
Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails.
ESG Risk: there may be limitations to the availability, completeness or accuracy of ESG information from third-party providers, or inconsistencies in the consideration of ESG factors across different third party data providers, given the evolving nature of ESG."


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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