Liontrust GF SF Pan-European Growth Fund

Q4 2020 review

The Fund returned 12.4% over the quarter in euro terms, outperforming the MSCI Europe Index’s 10.8% (which is the comparator benchmark)*.

In terms of macro developments, positive news on effective vaccines in November drove a strong recovery in markets after a weaker October. This optimism was further buoyed by Joe Biden’s victory in the US Presidential election and we also saw an end to more than four years of Brexit negotiations, with the UK and EU unveiling a deal on Christmas Eve that should help markets start 2021 on firmer footing and allow companies to plan ahead.

Meanwhile, European Central Bank President Christine Lagarde announced plans to extend its Pandemic emergency purchase programme (PEPP) by another €500 billion and until March 2022, by which point she believes the eurozone will have achieved the herd immunity needed for the economy to operate normally.

While concerns about Covid-19 remain, with many countries forced back into lockdown amid worries about the virus mutating, broad market outperformance continued to the end of the year on the back of expectations of a better 2021. While we welcome the recovery in our more cyclical names, we avoid trying to predict how the macro picture will develop and focus on backing companies benefiting from the structural shift towards a more sustainable economy and generating high returns. Covid-19 does not change our view that companies exposed to sustainable themes will see strong growth and many of these areas will accelerate as the world recovers.

Top performers over the quarter included several of our financial names as the sector enjoyed a strong end to 2020, with Q3 addition Avanza and DNB among the best contributors. As we wrote last quarter, Avanza is Sweden’s leading investment platform (also held under our Saving for the future theme) and continues to take market share with superior technology and customer service. 2020 has been an unusually strong year for the company – the platform added around 304,000 customers, representing a growth rate of 31%. To put this in perspective, over the 2017 to 2019 period, it added 405,000 customers. Avanza is taking over a 20% share of the net inflows in the Swedish savings market compared to its market share of around 5%. The company will benefit from a sustained period of above-market growth as its overall market share converges with share of net inflows.

Norwegian retail bank DNB, meanwhile, is held under our Increasing financial resilience theme and possesses many of the quality indicators we look for in this sector, including prudent lending practices, strong capitalisation and growing returns on equity. Much of this was evident from the group’s Q3 results, in which it outlined high activity and healthy growth as well as capital adequacy at a record high, with a common equity Tier 1 capital ratio of 18.9%.


Elsewhere, our best-performing holdings included several consumer-facing names such as Trainline, Basic-Fit, CTS Eventim and Compass Group, rewarding our adds to these bruised companies in the third quarter. We trimmed positions in some of our more defensive and momentum holdings that had soared during the Covid-19 crisis, including Abcam and SAP for example.


Looking at Trainline, which we added to the Fund in Q3, the company had been struggling amid the pandemic, as would be expected for a travel business during a period of lockdown. Our thesis is that growth will return for this highly profitable business with an undemanding valuation, with safe, efficient mass transport the only way to reduce congestion and emissions in our cities.

Shares in the company have been volatile this year, falling from 540p in February to a low of 210p in March, before rising back to around 530p by the end May and dropping to 260p in October. We took a long-term perspective on the business, our thesis and the valuation, and bought on weakness. Three doses of positive vaccine news allowed investors to recalibrate their expectations for many companies with a return to some kind of normality in sight, and Trainline has been among the largest beneficiaries with share price growth of more than 60% over November.

Basic-Fit was also up around 50% over November, while CTS Eventim and Compass Group registered strong gains, with these companies, and many others, rallying as the market is finally able to look beyond temporarily depressed demand for their goods or services.

CTS is Europe’s largest ticketing company for music and sports, and again, we were happy to buy on weakness in Q2 as we felt the market fundamentally misunderstood the ultimate Covid impact on the business as the majority of events were postponed, not cancelled, and CTS experienced no significant cash outflows. Over the next five to 10 years, we believe the increase in demand and supply for live events will recover, seeing growth in absolute terms through the global financial crisis, for example, despite a dramatic fall in disposable income.

Our long-term semiconductor holdings, Infineon and ASML, also continue to feature among the stronger performers, with both posting solid results over recent months. Infineon CEO Reinhard Ploss said some of the company’s target markets, especially the automotive sector, have recovered better than expected since summer and the structural transformation towards electro mobility is accelerating, particularly in Europe, which remains a key part of our thesis. 

Among weaker holdings, companies with accelerating demand due to the lockdown gave back some of their gains of recent months, including communication names such as Cellnex, which did not participate in the cyclical rally driven by the vaccine announcement.

Elsewhere, Kingspan shares fell over the quarter, with the company part of the Inquiry into the Grenfell Tower tragedy. Like everyone else, we must await the conclusions and recommendations of the Inquiry before we can fully determine the impact on the company’s future, but we recognise failings in the governance of fire specifications on its insulation products. A core part of the Liontrust Sustainable Investment team’s process has been direct engagement, which we use to challenge companies, encouraging and pushing them to implement better business practices. Given this approach, we began questioning Kingspan the day after the Grenfell tragedy in June 2017. The team have continued engaging with Kingspan about Grenfell Tower in particular and the fire resistance of the company’s products more generally.

The reasons we have invested in Kingspan for 15 years and continue to do so is because of the company’s positive impact on energy use and its leading approach to carbon reduction and the circular use of materials. Notwithstanding this, we will engage with Kingspan about any findings of concern to the company.

SAP was another detractor, with the share price falling more than 20% after the company announced slowing third-quarter results. The global ERP leader announced a shift in strategy, moving the business away from on-premises licenses to a cloud SaaS model. This shift is causing some disruption in the next few years but has the potential to enable a better product and pricing power in the future. This is another case where we have to balance short-term price volatility amid a global pandemic versus long-term structural growth and, as the company stressed, customers have continued to accelerate their move to the cloud during Covid-19. As previously stated, we cut our position in SAP back in July based on valuation, so the impact of this guidance change was less than it might have been, recycling the proceeds into more cyclical and consumer-facing names. Long term, we continue to believe this is a very strong franchise with a sticky customer base and well invested product.

In terms of Q4 buys, we added National Express, a public transport operation with bus, coach and rail services in the UK, Continental Europe, North Africa, North America, and the Middle East. This is a long-term holding in the UK funds but we introduced to our European portfolios on the back of good fundamentals and an extremely attractive valuation. We think the company can take market share from weakened competition and an accelerated shift to outsource more transport services. Additionally, the environmental advantages of public transport are an important factor in reducing emissions, which, along with urbanisation, should also boost growth longer term.


We exited our position in Verbund, an Austrian hydro-electric energy generator. The business has benefitted from the increasing price of carbon but our analysis concluded that this sharp rise in carbon, and in overall power prices in Europe, was already reflected in the valuation after a very strong rally in shares. We therefore sold our position as they reflect fair value.


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







Liontrust GF SF Pan-European Growth Fund






MSCI Europe







*Source: Financial Express, as at 31.12.20, primary share class, in euro terms, total return, net of fees and income reinvested.


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. The majority of the Liontrust Sustainable Future Funds have holdings which are denominated in currencies other than Sterling and may be affected by movements in exchange rates. Some of these funds invest in emerging markets which may involve a higher element of risk due to less well-regulated markets and political and economic instability. Consequently the value of an investment may rise or fall in line with the exchange rates. Liontrust UK Ethical Fund, Liontrust SF European Growth Fund and Liontrust SF UK Growth Fund invest geographically in a narrow range and has a concentrated portfolio of securities, there is an increased risk of volatility which may result in frequent rises and falls in the Fund’s share price. Liontrust SF Managed Fund, Liontrust SF Corporate Bond Fund, Liontrust SF Cautious Managed Fund, Liontrust SF Defensive Managed Fund and Liontrust Monthly Income Bond Fund invest in bonds and other fixed-interest securities - fluctuations in interest rates are likely to affect the value of these financial instruments. If long-term interest rates rise, the value of your shares is likely to fall. If you need to access your money quickly it is possible that, in difficult market conditions, it could be hard to sell holdings in corporate bond funds. This is because there is low trading activity in the markets for many of the bonds held by these funds. Mentioned above five funds can also invest in derivatives. Derivatives are used to protect against currencies, credit and interests rates move 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 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.

Wednesday, January 20, 2021, 3:59 PM