The Fund’s A3 share class returned 4.3%* in euro terms in March. This Fund’s target benchmark, the MSCI Europe Small Cap Index, returned 4.3%.
European markets participated in the global equity rally in March, as investors became more confident that the central banks’ policy tightening efforts have successfully walked the fine line between bringing inflation down and allowing the economy to maintain some momentum.
As widely expected, the US Federal Reserve held interest rates steady for the fifth consecutive meeting, but investor sentiment was boosted by forecasts for cuts later in the year despite mounting evidence of economic resilience. The central bank upgraded its forecast for 2024 US GDP growth from 1.4% to 2.1%. In Europe, we saw the first rate cut in this monetary cycle from a developed world central bank as the Swiss National Bank reduced its benchmark rate from 1.75% to 1.5%.
The overall trend in Q1 was, however, towards an expectation of fewer rate cuts in the remainder of 2024. Looking at the eurozone for example, markets started 2024 expecting between six and seven quarter-point cuts this year but by the end of March price in only three to four cuts. This modest revival of the “higher-for-longer” theme that dominated for periods of 2023 provided a tailwind to the banking sector, which typically earns larger net interest margins when benchmark rates are higher. In March, the European market rise was led by real estate (+9.2%) and finance (+7.6%), while consumer staples (+1.2%) and IT (+1.2%) were laggards.
Italian cement and concrete producer Buzzi (+17%) rallied through the month, helped by positive broker coverage which included one analyst raising their price target and describing the stock as possessing deep value attractions. In February the company had reported full-year results describing an environment of lower volumes which have been more than offset by higher prices.
Italian banks BPER Banca (+18%) and Bankinter (+17%) both strengthened in March without issuing significant investor updates. Sector strength looks to have been partially supported by rumours of potential consolidation of Italian banks.
Fortnox (-10%), the Swedish provider of internet-based business applications, performed strongly in February after releasing consensus-beating Q4 results. Some of these gains were given back in March as a prominent financial press article raised question marks over the manner in which Fortnox defines its addressable market and the level of transparency of its accounts.
Bytes Technology Group (-8.3%) fell sharply last month after its CEO, Neil Murphy, resigned after notifying the board that he had made undisclosed trades in company shares. During March, the software, security and cloud service specialist issued a full-year trading update outlining 12% growth in adjusted operating profit and cash conversion in line with its 100% target. It commented that, despite macroeconomic headwinds, demand from corporate and public sector clients has been very strong. This upbeat assessment remained overshadowed by the shock leadership change; the company released an additional statement outlining its dismay at the more than 100 undisclosed transactions by Mr Murphy between 2021 and 2023.
Positive contributors to performance included:
BPER Banca (+18%), Bankinter (+17%) and Buzzi (+17%).
Negative contributors to performance included:
Fortnox (-10%), Norwegian Air Shuttle (-8.3%) and Bytes Technology Group (-8.3%).
Discrete years' performance (%) to previous quarter-end:
|
|
Mar-24 |
Mar-23 |
Mar-22 |
Mar-21 |
Mar-20 |
|
Liontrust GF European Smaller Companies A3 Acc EUR |
16.4% |
-2.6% |
7.9% |
70.2% |
-21.6% |
|
MSCI Europe Small Cap |
10.2% |
-9.1% |
1.9% |
61.2% |
-18.1% |
|
|
Mar-19 |
Mar-18 |
|
Liontrust GF European Smaller Companies A3 Acc EUR |
-2.3% |
1.2% |
|
MSCI Europe Small Cap |
-1.3% |
8.3% |
*Source: Financial Express, as at 31.03.24, total return (net of fees and income reinvested).
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
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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.
