Liontrust GF European Strategic Equity Fund

The Fund’s A4 share class returned 1.3* in euro terms in September. The Fund’s comparator benchmarks, the MSCI Europe Index and HFRX Equity Hedge EUR Index, returned -1.6% and -0.9% respectively.

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%).

The Fund’s positive performance in September resulted from an exceptional return from its short book (c.37% NAV), which more than compensated for the Fund’s 81% net exposure to a falling market. While the Fund’s long book positions fell broadly in line with the market, the stocks in which it had short positions tumbled by an average of 9.5%. The Fund’s short book made a positive performance contribution of 3.5% during September.

One of the best performing short book positions was a French renewable energy specialist that downgraded its 2023 earnings guidance due to the impact of a power cut in Brazil. A US designer and manufacturer of components for mobile phones also generated short book profits as its shares dropped after announcing a worse-than-expected loss in its most recent quarter. Another key contributor in the short book was a US manufacturer of wind turbine blades whose shares have been in a downtrend since releasing disappointing Q2 results in late July.

Although European markets were weak in September, we continue to be constructive on the outlook. 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.

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

Past performance does not predict future returns

*Source: Financial Express, as at 30.09.23, total return (income reinvested and net of fees).

**Source: Financial Express, as at 30.09.23, 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.

Key Features of the Liontrust GF European Strategic Equity 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. 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.