The Fund’s A3 share class returned 4.0%* in euro terms in December. This Fund’s target benchmark, the MSCI Europe Small Cap Index, returned 7.0%.
European markets continued their strong end to 2023, with all of the year’s 12.7% return coming in November and December.
Investors continued to bet on rate cuts next year, defying the more measured recent message from central bankers that policy direction remains in the balance and data-dependent. This shift gained more impetus mid-month as the US Federal Reserve signalled several rate cuts next year within its ‘dot plot’ forecasts and surprised investors who had been expecting a stronger effort to rein in the rally in bonds.
The European Central Bank and Bank of England were more consistent in re-iterating the ongoing risks from inflationary pressures, with ECB president Lagarde saying “we should absolutely not lower our guard.”
Nevertheless, markets finished the year pricing in 160 basis points of rate cuts from the ECB in 2024, compared with the 100bps forecast at the start of the month.
As investor risk appetite improved, European markets joined in the global equity rally, led by cyclical sectors such as real estate (+11%), industrials (+7.2%), materials (+6.5%) and IT (+4.7%). The MSCI Europe laggards were energy (-1.3%), consumer staples (+0.8%) and communication services (+0.9%).
The Fund’s best performers mirrored the pattern seen across the market, with cyclical stocks prominent; Austrian brickmaker Weinerberger (+15%), French market research group Ipsos (+15%) and Norwegian Air Shuttle (+13%) led a group of seven stocks posting double-digit percentage gains. Gains for the latter were helped by Norway’s competition authority giving the go-ahead for its $110m takeover of Wideroe. It had previously warned in a preliminary finding in November that it could block the deal. However, overlap between the two carriers is low, with Wideroe primarily serving regional routes between smaller airports in Norway compared with Norwegian Air Shuttle’s international routes and larger domestic routes.
While the financials sector overall recorded a solid 4.0% rise, the Fund saw some weakness among its banks – the unwinding of some of the gains made earlier this year as rising rate expectations boosted forecasts for banks’ net interest income. BPER Banca (-12%), Bankinter (-7.9%) and Bank of Ireland (-4.3%) all pulled back.
Games Workshop Group (-8.3%) also lost some ground after issuing a half-year trading update. Although the company described its core revenues of at least £235m and licensing revenue of around £12m as in-line with expectations, the update prompted some downgrades from research brokers who flagged softer-than-anticipated trading in the most recent quarter.
Positive contributors to performance included:
Weinerberger (+15%), Ipsos (+15%) and Norwegian Air Shuttle (+13%).
Negative contributors to performance included:
BPER Banca (-12%), Games Workshop Group (-8.3%) and Bankinter (-7.9%).
Discrete years' performance (%) to previous quarter-end:
|
|
Dec-23 |
Dec-22 |
Dec-21 |
Dec-20 |
Dec-19 |
|
Liontrust GF European Smaller Companies A3 Acc EUR |
7.0% |
-17.3% |
33.7% |
7.4% |
35.8% |
|
MSCI Europe Small Cap |
12.7% |
-22.5% |
23.8% |
4.6% |
31.4% |
|
|
Dec-18 |
|
Liontrust GF European Smaller Companies A3 Acc EUR |
-19.9% |
|
MSCI Europe Small Cap |
-15.9% |
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.
