Liontrust GF European Smaller Companies Fund

December 2020 review

The Fund’s A5 share class returned 8.7%* in euro terms in December. This Fund’s target benchmark, the MSCI Europe Small Cap Index, returned 6.0%.

 

December showed no respite in newsflow during what was an extraordinary year. The EU and UK finally agreed on a trade deal, bringing an end to much of the significant uncertainty surrounding the situation as the Brexit transition period came to a close. The threat of a no deal exit had loomed large throughout the month, but an agreement which maintained tariff-free trade on most goods was eventually reached and swiftly ratified by officials on both sides. Markets reacted positively, with sterling ending the year at its highest level against the US dollar.

 

During the negotiations, the UK began rolling out its vaccination programme but cases of Covid-19 climbed significantly higher. The government confirmed the presence of a new, faster spreading strain of the virus. Plans for easing restrictions for Christmas were quickly scrapped for the worst hit areas, as hospitalisations approached similar levels to the April peak.

 

Despite this new threat, equity markets registered a gain during December, but for 2020 as a whole the MSCI Europe Index fell 3.3% in euro terms. In December, the best performers were materials (+5.8%), IT (+5.4%) and consumer discretionary (+5.2%). The only sector to end in the red was health care (-0.2%).

 

However, it was the Fund’s financials holdings which performed the best in attribution terms. Bank of Ireland (+25%) and Impax Asset Management (+23%) were the two top picks. The former saw its share price appreciate after data for October showed the fastest rise in Irish mortgage approvals since 2011. Sustainable investment company Impax Asset Management released full year results for the 12 months to end September. Assets under management rose 34% to £20bn, with net inflows more than doubling to £3.5bn. This fed through to a 19% increase in revenue and 29% rise in adjusted operating profit. Management said that AuM has continued to increase in the first two months of its new financial year and it has sustained a strong investment performance across its major strategies.

 

In a short statement, UK housebuilder Vistry Group (+14%) said its strong cash generation means that it expects to have a net debt position no greater than £40m at the end of 2020, with a possibility of a modest net cash position. Strong trading and low cancellations as well as good cash management have been the drivers of this improvement in outlook.

 

Jeweller Pandora (+9.0%) was another holding to issue a positive update. It said trading in Q4 had been strong, with positive organic growth in October and November, while revenue was above expectations in December. 10% of physical outlets were closed due to Covid-19 restrictions, but the negative impact was offset by strong online growth. As a result, it anticipates organic growth for 2020 will now be at least 1 percentage point better than the top end of its -14% to -17% guidance. Operating margin is expected to be at the top end of its 17.5% - 19% forecast.

 

One of the few detractors was Danish facility services company ISS (-7.6%) after it announced a “refreshed strategy”. It said that an extensive review found flaws in the execution of its previous strategy and it has decided to divest from areas of its business representing DKr4bn. This is expected to generate DKr2bn in net proceeds over 2021-2022, but the company has suspended its dividend until the end of 2022.

 

Positive contributors to performance included:

Bank of Ireland Group (+25%), ATOSS Software (+24%) and Impax Asset Management (+23%)

 

Negative contributors to performance included:

Nemetschek (-8.9%), ISS (-7.6%) and Gaztransport & Technigaz (-4.2%).

 

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

 

 

Dec-20

Dec-19

Dec-18

Liontrust GF European Smaller Companies A5 Acc EUR

7.2

35.5

-20.1

MSCI Europe Small Cap Index

4.6

31.4

-15.9

 

*Source: Financial Express, as at 31.12.20, total return (net of fees and income reinvested). Non fund-related return data sourced from Bloomberg.

 

**Source: Financial Express, as at 31.12.20, total return (net of fees and income reinvested). Discrete data is not available for five full 12 month periods due to the launch date of the portfolio. Investment decisions should not be based on short-term performance.

 

For a comprehensive list of common financial words and terms, see our glossary here.

 

Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in Funds managed by the Cashflow Solution team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Liontrust European Growth Fund holds a concentrated portfolio of stocks, if the price of one of these stocks should move significantly, this may have a notable effect on the value of the respective portfolio. The Liontrust Global Income Fund's expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation. 

Disclaimer

The information and opinions provided 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. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Thursday, January 14, 2021, 4:05 PM