Liontrust GF Pan-European Dynamic 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 Belimo, Pandora and InterContinental Hotels Group.

The Fund’s A5 share class returned 2.9%* in euro terms in February. This Fund’s target benchmark, the MSCI Europe Index, returned 3.6%.

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.

With finance sector stocks leading the European market over the period, the Fund’s banks were once again an area of significant strength, 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, AP Moller-Maersk (+18%) reported strong financial results for 2024, with growth across all segments and ”significantly improved” profitability. The logistics specialist reported an operating profit increase of 65% to $6.5 billion last year, up from $3.9 billion, while revenue for the year rose from $51 billion to $55.5 billion. Results were driven by increased container demand and higher ocean freight rates, along with revenue and volume growth in terminals and significant improvements across most logistics and services products.

Among the detractors was Belimo Holdings (-8.7%), the Swiss developer and producer of actuators for controlling heating, ventilation and air conditioning (HVAC) systems, after its 2025 profit margin guidance fell slightly below expectations. The company forecasts revenue growth above its 9.6% historical average but expects an operating profit margin of 18–20%, below consensus estimates.

Pandora (-8.1%) reported Q4 results largely in line with expectations but issued cautious guidance for FY25. Revenue reached DKK 11.97 billion (+11% organic growth), slightly beating the 10% consensus.

For FY25, Pandora targets 7-8% organic growth and 4-5% like-for-like growth, below the 9% consensus. It also lowered its FY26 operating margin outlook to the lower end of 26-27%.

Shares of Intercontinental Hotels Group (-7.1%) 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

Positive contributors to performance included:

Banco Santander (+25%), AP Moller-Maersk (+18%) and UniCredit (+14%)

Negative contributors to performance included:

Belimo Holding (-8.7%), Pandora (-8.1%) and InterContinental Hotels Group (-7.1%)