Liontrust European Dynamic Fund

• Eurozone shares experienced a decline in October, driven by concerns over economic growth and uncertainty surrounding the outcome of the US presidential election.
• Within the MSCI Europe ex-UK index, real estate, IT and materials sectors fell, while only communication services and financials posted gains.
• Automaker Renault rose after confirming its guidance for the full year, while Finnish marine and energy industry equipment manufacturer Wartsila faced challenges after third-quarter orders fell short of expectations.

The Fund returned -3.1% in sterling terms in October. The MSCI Europe ex-UK Index comparator benchmark returned -1.9% and the average return made by funds in the IA Europe ex-UK sector, also a comparator benchmark, was -2.8%.

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 real estate (-6.2%), information technology (-5.8%) and materials (-5.0%). In contrast, only the communication services (+1.6%) and finance (+0.7%) sectors posted positive returns 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.

Shares in Michelin (-14%), the French tire maker, fell sharply after it lowered its full-year earnings forecast to around €3.4 billion versus a previous forecast of more than €3.5 billion as high interest rates, lower consumer confidence and uncertainty over the pace of electrification impacted new car sales in various regions.

Bucking the trend of poor performance among automakers was Renault (+9.0%) 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  benefits from new models including the R5 electric car and updated Dacia sport utility vehicles.

Also among the stronger performers was Spanish bank Caixabank (+5.7%) after it released robust earnings, an improvement in guidance and a surprise share buyback announcement. In its Q3 earnings, the bank announced a net profit increase of 3% year-on-year, amounting to €1.57 billion, with a notable 20% surge in new lending. This performance is underpinned by solid customer fund growth, an increase in net interest income and a robust Spanish economy.

Wartsila (-12%) slid as 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.

Despite posting a fairly stable Q3 results release, Atlas Copco (-12%), the Swedish multinational industrial company, led the detractors over the month following negative read-across from semiconductor equipment maker ASML’s profit warning.

Positive contributors to performance included:

Renault (+9.0%), Caixabank (+5.7%) and UniCredit (+4.8%)

Negative contributors to performance included:

Wartsila (-12%), Michelin (-14%) and Atlas Copco (-11%)

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

*Source: Financial Express, as at 31.10.24, total return (net of fees and income reinvested), bid-to-bid, institutional class. Non fund-related return data sourced from Bloomberg.

**Source: Financial Express, as at 30.09.24, total return (net of fees and income reinvested), bid-to-bid, primary class.

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. 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. 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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