Liontrust GF European Strategic Equity Fund

• European markets continue to outperform US at the start of 2025
• The Fund’s financials holdings were a significant area of strength, with Banco Santander, Caixabank and UniCredit among the top performers.
• Among the detractors were InterContinental Hotels Group and 4imprint.

The Fund’s A4 share class returned 1.3%* in euro terms in February. The Fund’s comparator benchmarks, the MSCI Europe Index and HFRX Equity Hedge EUR Index, returned 3.6% and -0.7% respectively.

European equities again outperformed their US counterparts in February, with the MSCI Europe Index reflecting increased expectations of a ceasefire in Ukraine as well as President Trump’s decision to delay imposing tariffs on the European Union – though this initial optimism was tempered as signs emerged that this stance might be reconsidered.

The market gains were supported by largely robust earnings releases, while the defence sector in particular rallied strongly on expectations of increased military spending following the election of a new German government and signs that Trump may reduce US support to Ukraine.

Meanwhile, macroeconomic data indicated improving inflation prospects in the eurozone, though economic growth remained sluggish. This strengthened the case for monetary policy easing, with the European Central Bank widely expected to cut rates by at least 25 basis points at its next meeting.

Gains were fairly broad-based within the MSCI Europe Index: finance (+8.1%), communication services (+5.7%) and consumer staples (+4.2%) led the rise, with industrials (+3.6%), healthcare (+3.2%) and utilities (+2.8%) also posting moderate returns. Information technology (-2.7%) was the weakest sector following a sell-off triggered by disappointing guidance from Nvidia.

The Fund’s long book delivered a solid 1.3% return in February, though it lagged the MSCI benchmark. Despite strong gains in European markets throughout the month, the short book also contributed positively to overall returns.

With finance sector stocks leading the European market over the period, the Fund’s banks were once again an area of significant strength in the long book, with Banco Santander (+25%), Caixabank (+14%) and UniCredit (+14%) all in the Fund’s top ten contributors for the month, boosted by encouraging earnings updates.

Spanish lender Banco Santander reported record Q4 profit and announced €10 billion in share buybacks. Net profit rose 11% year-on-year to €3.3 billion in Q4 and 14% annually to €12.6 billion, driven by increased customer activity, strong margin management, and retail growth. For 2025, Santander targets around €62 billion in revenue and mid-high single-digit net income fee growth.

Caixabank maintained its strong momentum following last month’s earnings release, which reported a net profit of €1.54 billion for the September-December period, surpassing analysts' forecast. The bank also announced a share buyback program valued at €500 million, achieving its goal of distributing €12 billion to shareholders as part of its 2022-2024 strategic plan.

UniCredit reported stronger-than-expected profits but projected a slight revenue slowdown in the coming year due to a decline in net interest income. The bank posted a net profit of €1.97 billion for the final quarter of last year, bringing its annual net profit to approximately €9.71 billion.

Outside of financials, Swedish housing platform Hemnet's (+13%) share price rose following an analyst upgrade. The upgrade was driven by expectations of higher revenue per listing and sustained demand for Hemnet's premium products, boosting investor sentiment.

In the Fund’s short book, top contributors included a Norwegian salmon farmer, which announced a NOK 1.7 billion impairment related to its Canadian operations and is considering issuing a perpetual bond to refinance existing debt. Additionally, a semiconductor materials manufacturer lowered its full-year outlook due to challenges in the automotive industry.

Long book detractors included Intercontinental Hotels Group (-7.1%), which fell after reporting full-year results that met consensus expectations, but analysts highlighted increased interest rate payment guidance and 'key money' costs as potential challenges for the company.

4imprint Group (-13%), a leading promotional products supplier, did not announce any financial updates but experienced a broker rating downgrade.

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

*Source: Financial Express, as at 28.02.25, total return (income reinvested and net of fees). **Source: Financial Express, as at 31.12.24, total return (income reinvested and net of fees). Investment decisions should not be based on short-term performance.

KEY RISKS

Past performance does not predict future returns. You may get back less than you originally invested.

We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.

The Funds managed by the Cashflow Solution team:

• May hold overseas investments that 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 a Fund.
• May have a concentrated portfolio, i.e. hold a limited number of investments (35 or fewer) or have significant sector or factor exposures. If one of these investments or sectors / factors fall in value this can have a greater impact on the Fund's value than if it held a larger number of investments across a more diversified portfolio.
• May, under certain circumstances, invest in derivatives, but it is not intended that their use will materially affect volatility. Derivatives are used to protect against currencies, credit and interest rate moves 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 use of derivatives may create leverage or gearing resulting in potentially greater volatility or fluctuations in the net asset value of the Fund. A relatively small movement in the value of a derivative's underlying investment may have a larger impact, positive or negative, on the value of a fund than if the underlying investment was held instead. The use of derivative contracts may help us to control Fund volatility in both up and down markets by hedging against the general market.
• The use of derivative instruments that may result in higher cash levels. Cash may be deposited with several credit counterparties (e.g. international banks) or in short-dated bonds. A credit risk arises should one or more of these counterparties be unable to return the deposited cash.
• 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, 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.
• May target an absolute return. There is no guarantee that an absolute return will be generated over the time period stated in the fund objective or any other time period.

The risks detailed above are reflective of the full range of Funds managed by the Cashflow Solution team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.

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.

DISCLAIMER

This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.

It 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.

This information and analysis 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, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.

This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.com or direct from Liontrust. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.