Liontrust European Dynamic Fund

• European markets faced sustained pressure in December, driven by global uncertainties and cautious investor sentiment.
• Pandora was again among the top performers, rallying on November’s upgraded guidance, while Hermes defied sector challenges with another strong performance.
• Novo Nordisk shares fell after clinical trial results for its obesity drug showed meaningful weight loss but missed high investor expectations.

The Fund returned 1.1% in sterling terms in December. The MSCI Europe ex-UK Index comparator benchmark returned -0.9% and the average return made by funds in the IA Europe ex-UK sector, also a comparator benchmark, was 0.0%.

European markets faced sustained pressure in December, driven by global uncertainties and cautious investor sentiment. Concerns over anticipated US trade policies under President-elect Donald Trump, coupled with persistent geopolitical tensions, weighed on market performance. In response to these challenges, the European Central Bank (ECB) took further steps to support the economy, cutting its deposit rate by a quarter percentage point to 3%. This marked the ECB’s fourth rate cut in 2024, reflecting its commitment to easing borrowing conditions.

From a sector perspective, consumer discretionary (+4.7%), information technology (+3.9%) and financials (+0.7%) were the only areas to post a gain over the month, while healthcare (-5.8%), real estate (-5.5%) and utilities (-3.6%) slid the most.

Despite limited newsflow in December, Pandora's (+15%) shares rallied further as investors continued to digest November’s upgraded financial guidance. The jewellery retailer now projects organic growth of 11-12% for the year (from 9-12%) and maintained a stable EBIT margin forecast of around 25%

Despite a tough year for its sector, Hermes (+12%), the French luxury fashion house, continued to buck this trend, posting another solid month of performance. In December, Hermes received an upgrade to a buy rating by a covering analyst, reflecting growing confidence in the company's ability to deliver consistent results and navigate headwinds facing the broader luxury industry.

Shares in Renault (+16%) rose primarily due to reports of potential merger talks between Nissan and Honda. Renault holds a significant stake in Nissan.

Shares in Danish drug maker Novo Nordisk (-18%), known for its blockbuster drugs Ozempic and Wegovy, fell sharply after the company released results from a clinical trial for its experimental obesity drug, CagriSema. The trial showed that CagriSema helped patients lose an average of 22.7% of their body weight in a late-stage study, falling short of the trial's 25% goal.

While the results were still significant and demonstrated meaningful weight loss, they did not fully meet elevated investor expectations. However, the company attributed the lower than expected efficacy to the protocol (as patients have a choice of staying on the lower dose to have fewer side effects or taking the higher dose which shows greater efficacy but with the risk of greater side effects). Following these results, the company intends to initiate another Phase 3 trial with a different protocol to optimise weight loss.  

Inditex (-5.3%), the owner of the Zara retail chain, reported slower sales growth at the outset of the crucial holiday shopping season. The Spain-based retailer said revenue, excluding currency swings, grew 9% in the five weeks to 9 December, compared with 14% during the same period a year earlier. This figure also lagged behind the company's sales growth for the nine months leading up to October 2024, signalling a deceleration during a  key seasonal shopping period.

The retailer highlighted currency headwinds as a significant factor impacting performance. The strength of the euro against most global currencies, coupled with depreciations in the Brazilian real and the Mexican peso, created an unfavourable exchange rate environment, which weighed on sales and pressured profit margins during the third quarter.

Positive contributors to performance included:

Renault (+16%), Pandora (+15%) and Hermes (+12%)

Negative contributors to performance included:

Novo Nordisk (-18%), Novartis (-6.2%) and Industria de Diseno Textil (-5.3%)

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

*Source: Financial Express, as at 31.12.24, 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 31.12.24, 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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