Liontrust GF European Strategic Equity Fund

The Fund’s A4 share class returned 1.0%* in euro terms in October. The Fund’s comparator benchmarks, the MSCI Europe Index and HFRX Equity Hedge EUR Index, returned -3.3% and -0.8% respectively.

Eurozone shares experienced a decline in October, driven by concerns over economic growth and uncertainty surrounding the outcome of the US presidential election. The weakest-performing sectors were information technology (-7.2%), real estate (-6.8%) and materials (-6.5%). In contrast, only the energy sector (+0.2%) posted a positive return for the month.

As the Q3 earnings season progressed, there were a few notable weaker-than-expected releases within the information technology sector. The consumer discretionary sector also faced setbacks, with quarterly updates from several car manufacturers and some luxury goods companies falling short of market expectations.

In October, the European Central Bank (ECB) reduced interest rates by 25 basis points. However, a rise in inflation and an accelerated pace of economic growth suggest that further rate cuts may not be imminent.

Strong performance from the Fund in October was driven by its short book (c.30% NAV), with the portfolio making a positive contribution of 1.9% as its positions on average fell by more than the market. The Fund’s long book, while down on the month, significantly outperformed the MSCI Index, providing a strong source of positive attribution.

Within the Fund’s long book, US travel company Booking Holdings was the top performer as it beat consensus estimates for third-quarter profit and revenue as resilient demand for international travel offset the weakness in domestic travel in the U.S. and China. Booking also upgraded its outlook for the full-year following the stronger third quarter – the company now expects full year gross bookings to increase by about 8%, an improvement from its prior expectation of “faster than 6%”.

Shares in Swedish online gambling company Betsson moved higher after a positive Q3 and interim results release. Over the three months, Betsson reported an 18% increase in group revenue to €280 million, driven by high customer activity in Latin America, Western Europe and Central and Eastern Europe and Central Asia, while new record levels in customer deposits and gaming turnover also helped push revenue higher.

Bucking the trend of poor performance among automakers was Renault after it confirmed its full-year guidance, while Q3 revenue rose to €10.7 billion. The manufacturer still expects a group operating margin of at least 7.5% this year, and free cash flow of €2.5 billion or more as it expects to benefit from new models including the R5 electric car and updated Dacia sport utility vehicles.

In the short book, positive contributors included a Swiss software company which cut its guidance for the second time in three months and reported lower-than-expected revenue, and a Danish digital sports media company which downgraded full-year 2024 financial guidance.

Turning to the long book detractors, Ipsos fell sharply after the market and consumer analytics firm cut its guidance for 2024 organic growth to 1% from around 3% previously amid a weaker-than-expected third quarter. While Ipsos said it continues to see solid growth in Continental Europe, the Middle East and Latin America, the company has struggled with a tougher market environment in the US.

Also among the detractors for the period was Wartsila after the Finnish marine and energy industry equipment manufacturer’s third-quarter orders fell short of expectations, while its margin outlook for the fourth quarter was seen as negative.

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

*Source: Financial Express, as at 31.10.24, total return (income reinvested and net of fees).

**Source: Financial Express, as at 30.09.24, total return (income reinvested and net of fees). Investment decisions should not be based on short-term performance.

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.

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