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% |
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.
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