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Liontrust GF European Strategic Equity Fund

August 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’s A4 share class returned 0.1* in euro terms in August. The Fund’s comparator benchmarks, the MSCI Europe Index and HFRX Equity Hedge EUR Index, returned -2.5% and 0.1% respectively.

 

Global markets fell at the start of the month after the credit rating agency Fitch downgraded the US government’s credit rating from AAA to AA+, citing unsustainable debt and increased political dysfunction. Elsewhere, renewed stress in the Chinese property market and underwhelming macroeconomic data out of China triggered an increase in market volatility.

 

The Bank of England raised interest rates 0.25 percentage points to 5.25 per cent and warned borrowing costs are likely to remain elevated despite slowing inflation. The Banks’ governor Andrew Bailey emphasised that interest rates would need to stay at high levels, stating that in order to get inflation back to target, the UK is going to have to keep its current stance on policy.

The Fund’s long book exposure averaged over 118% of Fund NAV during the month and its holdings generated an average return of -1.3%, which, while negative, was ahead of the benchmark return. The Fund’s short book was also a key contributor over the period, with shares on average dropping by twice as much as the benchmark.

 

Novo Nordisk (+17%), the Danish pharmaceutical group behind top-selling obesity drug Wegovy, was the top performer in the Fund’s long book over the period after lifting its annual sales forecasts, now expecting sales to grow 27-33% this year and operating profit to climb between 31-37%, exceeding prior expectations. The improved outlook for Novo was driven by higher than expected demand in the US for Ozempic – its diabetes drug that some clinicians have been prescribing to patients to tackle obesity as it contains the same active ingredient as Wegovy.

 

Shares in 4imprint Group (+16%) bounced back from a lacklustre showing in July to rank among the top long book performers in August. The London-based direct marketer of promotional merchandise rose on the release of a trading update in which the company announced that profit before tax for the full year was expected to be materially above the consensus of analysts’ forecasts.

 

Glass packaging manufacturer Verallia (+9.4%) continued its momentum following last month’s strong first half results release in which the company also included an upgrade to guidance. Around a third of earnings over the period was attributable to Verallia increasing sales prices at a faster pace than production costs. Overall, adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) rose by more than 50% to €659m. The company reiterated its 2023 full-year revenue growth target of over 20% and increased its EBITDA guidance to €1.1bn - €1.25bn, up from €1.0bn previously.

 

One of the largest positive contributions to the Fund’s short book came from an e-commerce company focused on luxury fashion and beauty products after it reported weaker-than-expected revenue for the second quarter and lowered its gross merchandise value and EBITDA margin projections for the full-year.

 

A short position in a Danish manufacturer of hearing aids and headsets was another highlight as the company cut guidance for its hearing segment.


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

Past performance does not predict future returns

 

Jun-23

Jun-22

Jun-21

Jun-20

Jun-19

Liontrust GF European Strategic Equity
A4 Acc EUR

3.1%

31.7%

36.9%

-15.5%

2.5%

MSCI Europe

16.7%

-6.5%

27.9%

-5.5%

4.5%

HFRX Equity Hedge EUR

2.0%

-2.2%

19.0%

-4.5%

-6.3%

 

 

Jun-18

Jun-17

Jun-16

Jun-15

Liontrust GF European Strategic Equity
A4 Acc EUR

3.0%

5.3%

2.9%

10.1%

MSCI Europe

2.8%

18.0%

-11.0%

13.5%

HFRX Equity Hedge EUR

3.5%

6.0%

-9.4%

1.9%


*Source: Financial Express, as at 31.07.23, total return (income reinvested and net of fees).


**Source: Financial Express, as at 30.06.23, total return (income reinvested and net of fees).
Discrete data is not available for ten full 12-month periods due to the launch date of the portfolio (25.04.14). Investment decisions should not be based on short-term performance.

 

A performance fee of 20% is calculated and accrued at each valuation point. Payment is subject to the Fund's net asset value exceeding an Adjusted Prior Net Asset Value which is a High Water Mark adjusted by any new subscriptions or redemptions and a 4% hurdle per calendar year. No Performance Fee will be payable with respect to a Fund class in any Performance Period unless such class has recovered any accumulated underperformance for previous Performance Periods. Any performance fees are only payable on the positive difference between the NAV and the Adjusted Prior Net  Asset Value. 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.

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.

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. 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 uses derivative instruments that may result in higher cash levels. Outside of normal conditions, the Fund may choose to hold higher levels of cash. Cash may be deposited with several credit counterparties (e.g. international banks) or in short dated bonds. A credit risk arises should one or more of these counterparties be unable to return the deposited cash. There is no guarantee that a positive absolute return will be generated over any time period.

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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