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Liontrust GF European Smaller Companies

October 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 A3 share class returned -5.7%* in euro terms in October. This Fund’s target benchmark, the MSCI Europe Small Cap Index, returned -5.9%.

Most markets fell in October as investors grappled with ongoing inflationary pressures and adjusted to the possibility that interest rates may remain high for some time, while the unfolding crisis in the Middle East has also added a degree of geopolitical uncertainty. In Europe, the European Central Bank left its deposit rate unchanged at 4%, altering its path after ten consecutive rate hikes, though the bank did not rule out further tightening.

Sector returns were broadly negative for the period, with the exception of utilities (+0.5%) which posted a marginally positive return. The weakest sectors in the European market were healthcare (-5.4%), consumer discretionary (-5.2%), industrials (-4.8%) and financials (-4.5%).

Danish jewellery manufacturer and retailer Pandora (+9.5%) rose after a positive update at its capital markets day, where the company announced new financial targets which were well received by the market. Pandora announced an EBIT margin target of 26-27% by 2026, an increase from c.25% in 2023. Furthermore, the company expects revenue to reach DKK 34-36 billion in 2026, up DKK 7-9 billion from the expectation of around DKK 27 billion for 2023.

Freenet (+7.9%) strengthened over the period, despite there being no updates on trading from the German telecommunications and web content provider.

Online real estate property portal Rightmove (-16%) fell on the news of a takeover bid of rival company OnTheMarket by US property data company CoStar. In the announcement, OnTheMarket commented that it plans to build up scale and directly challenge Rightmove.

Swedish cloud-based accounting software company Fortnox (-26%) was also among the detractors, dropping on the release of its interim report to September. Analysts were disappointed with the company’s organic growth figures which amounted to 25% - Fortnox blamed the drop from 35% the previous year on generally lower activity in the market.

Verallia (-18%), the producer of glass packaging for beverages and food products, fell on the announcement of its results for the first nine months of the year. Despite reporting an increase in revenue, the company stated that it observed a drop in demand since August due to slowing consumption and ongoing destocking along the value chain. Following these deteriorating market conditions, Verallia announced that it would adjust production capacity as it prepares for more stable market conditions in 2024.

Positive contributors to performance included:

Pandora (+9.0%), Freenet (+7.9%) and Ipsos (+5.3%)

Negative contributors to performance included:

Fortnox (-26%), Verallia (-18%) and Rightmove (-16%).

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

 

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 31.10.23, 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.

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 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.

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