The Fund’s A3 share class returned -1.9%* in euro terms in September. This Fund’s target benchmark, the MSCI Europe Small Cap Index, returned -2.8%.
The European Central Bank continued along its rate hiking path raising the deposit rate by 25 basis points to an all-time high of to 4%, marking 10 consecutive rate hikes. Both the Bank of England and US Federal Reserve chose to pause their rate-hike cycles during September, but forecasts from the Fed’s rate-setting committee led investors to expect fewer rate cuts from current levels over the next two years.
In terms of sector returns, energy (+7.3%) was a significant riser over the month, benefitting from higher oil prices after production was cut in Saudi Arabia and Russia. Communication services (1.2%) and financials (+1.2%) also posted a gain in euro terms. The weakest sectors in European markets were information technology (-5.9%), consumer discretionary (-5.7%), utilities (-4.1%), and consumer staples (-3.6%).
Looking at the portfolio’s largest stock-specific performance contributors and detractors over the month, few released significant updates to investors which would explain their share price moves. From a sector perspective, one notable trend was financial sector strength showing through in the portfolio in the form of gains for Bankinter (+4.4%), BPER Banca (+3.9%) and Bank of Ireland (+1.0%). Again, none of these stocks updated the market during September.
On the downside, tech sector weakness was also apparent in the share price falls of ATOSS Software (-12.7%), the workforce management software specialists, Paradox Interactive (-15%), a video game developer, and Playtech (-15%), the gambling software developer. Over the last couple of years the sector has proven very sensitive to changes to interest rate expectations as some of its high growth, high share price valuation constituents react to changing rates at which investors discount potential future growth. Rising medium-term rate expectations therefore presented a headwind to the sector in September.
Playtech slid despite releasing interim results which were in-line with expectations. The shares may have been held back by rumours that it was setting up a bid for the owner of PlanetWin365, an Italian company valued at around £500m. Later in the month Playtech confirmed its interest, as well as noting there were other potential suitors for the company, thought to include Flutter Entertainment.
We continue to be constructive on the outlook for European equity markets. The MSCI Europe remains in a clear uptrend and valuations are reasonable. Furthermore, our measure of corporate aggression has fallen significantly, which is usually a positive sign for markets.
From a style point of view we continue to expect that both value and momentum investment styles should perform well. Until its renaissance post Covid, value styles had endured a dreadful decade and currently the spread between the valuations of growth and value stocks – though less extreme than existed in mid 2020 – is still wide. Furthermore our measure of investor anxiety – a good barometer of the potential for value to perform – is not yet at the low levels that would cause us to be more cautious on value. High investor anxiety usually goes hand in hand with strong value performance. With regard to the momentum factor, our proprietary indicator of momentum efficacy is currently very constructive, suggesting a minimal likelihood of a momentum crash in Europe.
Positive contributors to performance included:
Fortnox (+6.0%), Bankinter (+4.4%) and BPER Banca (+3.9%).
Negative contributors to performance included:
Verallia (-16%), Paradox Interactive (-15%) and Playtech (-15%).
Discrete years' performance** (%), to previous quarter-end:
Past performance does not predict future returns
|
|
Sep-23 |
Sep-22 |
Sep-21 |
Sep-20 |
Sep-19 |
|
Liontrust GF European Smaller Companies A3 Acc EUR |
14.2% |
-20.7% |
59.1% |
-1.9% |
-6.7% |
|
MSCI Europe Small Cap |
14.0% |
-26.9% |
38.0% |
0.2% |
-1.8% |
|
|
Sep-18 |
|
Liontrust GF European Smaller Companies A3 Acc EUR |
2.0% |
|
MSCI Europe Small Cap |
3.4% |
*Source: Financial Express, as at 30.09.23, total return (net of fees and income reinvested).
**Source: Financial Express, as at 30.09.23, 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
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. 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. As the Fund is primarily exposed to smaller companies there may be liquidity constraints from time to time, i.e. in certain circumstances, the fund may not be able to sell a position for full value or at all in the short term. This may affect performance and could cause the fund to defer or suspend redemptions of its shares. In addition the spread between the price you buy and sell units will reflect the less liquid nature of the underlying holdings. 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.
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.
