Liontrust GF Sustainable Future Pan-European Growth Fund

Key takeaways

• The third quarter saw European equities advance as sentiment improved and policymakers continued to provide reassurance.
• Our healthcare holdings continued to weigh on returns amid weak post-Covid demand and US regulatory uncertainty. We remain confident in our long-term positioning.
• Financials contributed strongly to benchmark returns. However, the Fund’s modest underweight position detracted from performance.
• ASML, Vestas Wind Systems and Kainos were among the top performers, with CTS Eventim, Alcon and London Stock Exchange Group among the fallers.

Performance

The Fund delivered a return of -4.7% over the period in euro terms, versus the MSCI Europe Index’s 3.5% return (which is the comparator benchmark)*.

Commentary

The third quarter saw European equities advance as sentiment improved and policymakers continued to provide reassurance. The European Central Bank kept rates unchanged at 2% and revised its growth expectations higher, signalling confidence in the region’s recovery. Meanwhile, the Federal Reserve’s decision to lower rates and hint at further easing added to the sense of optimism in global markets.

Our healthcare allocation continued to weigh on returns, both this year and in previous periods. The industry still faces headwinds, including subdued post-Covid investment, weak demand, and ongoing US regulatory uncertainty. 

Despite these near-term headwinds, we remain confident in our long-term positioning – driven by innovation and ageing demographics. We believe current valuations represent a generational buying opportunity, particularly as the market has become increasingly short-term in its focus – and we have selectively added to a few positions with the most attractive risk adjusted upside. Encouragingly, summer earnings revealed early signs of improvement, though sentiment toward the sector remains muted, especially given the policy direction of the current US administration.

We are also seeing positive momentum in life sciences. We continue to believe that pharmaceutical and biotechnology companies must invest heavily to replenish their pipelines, positioning them well for long-term growth.

The financials sector made a meaningful contribution to benchmark returns during the quarter. Although the Fund held a modest underweight position in the sector, its relative performance was more subdued, which acted as a drag on returns versus the benchmark. European banking stocks have performed incredibly well over the year and quarter, whilst we own three banks, these are the highest quality in terms of earnings and balance sheet strength and the market is currently rewarding those banks with the greatest earnings revision related to higher for longer interest rates. We believe that, as a long-term owner of banks (+10 years typically), it pays to be in the highest quality banks rather than chasing near-term momentum.

With regards to stock specifics, CTS Eventim (-19%), live entertainment and ticketing company reported that adjusted earnings before interest, tax, depreciation and amortization (EBITDA) declined marginally in the first half, slipping 0.8% to €200.5 million. Held under our Encouraging sustainable leisure theme, CTS Eventim noted that the slight decrease reflected higher cost pressures within its live entertainment operations, alongside integration expenses related to the recent acquisitions of See Tickets and France Billet. Q2 is one of the seasonal lows within the industry, which is more H2 and specifically Q4 weighted as often tickets for live events are gifted during the Christmas break. We therefore believe that the higher acquisition related integration costs and the slow quarter does not change the long-term outlook for the business. We have added to our position on this weakness.

American-Swiss medical device specialist Alcon’s (-14%) share price declined following the release of weaker-than-expected second-quarter results and a downward revision to 2025 guidance. Held under our Enabling innovation in healthcare theme, the specialist in ophthalmology and eye surgery reported a notable fall in net income, reflecting softer earnings momentum. Management also trimmed revenue and margin expectations for the year ahead, citing the anticipated impact of tariffs and ongoing cost pressures.

Data service provider London Stock Exchange Group (LSEG, -20%) was also among the largest fallers. LSEG supplies unique and essential datasets to financial market participants and remains well positioned to benefit from the long-term trend toward greater transparency and data-driven decision-making.

However, its share price weakness reflected investor concerns that its business model could face disruption from advances in artificial intelligence. Earnings estimates have continued to be upgraded over the last two years, yet the share price has fallen sharply of late despite no material change in underlying expectations. This move appears driven by a narrative that large language models (LLMs) could create competing data providers at a fraction of the cost.

We believe LSEG is far more than a “pure data” supplier, and that its products and services cannot be easily replicated by an LLM. While we acknowledge these risks and continue to monitor them closely, we believe the market may be underestimating the company’s ability to adapt. LSEG is deeply integrated into its clients’ workflows, and we view it as more likely that it will leverage AI to enhance its product offerings and efficiency rather than be displaced by it.

Turing to the positives, ASML (+25%) emerged as the strongest performer this quarter, benefiting from the renewed enthusiasm for AI-related names. The uplift in sentiment across the sector in the closing stages of the quarter helped drive the stock higher.

ASML remains at the forefront of improving semiconductor fabrication through EUV development and holistic lithography. Smaller process nodes means more chips per wafer in manufacture and smaller, cheaper, more reliable, more energy efficient and more powerful end products. These advances in semiconductor manufacturing underpin improvements in Logic Chips and the ever-greater processing power of our computers, which in turn drives almost every aspect of our technological, scientific and commercial breakthroughs.

Within renewables, a lot has been made of President Trump’s potential impact on the energy sector, with investors wary of policy uncertainty. However, Vestas Wind Systems’ (+28%) shares surged after new guidance from US government agencies provided long-awaited clarity on how clean energy projects will qualify for tax credits. The rules proved to be more straightforward and less restrictive than expected, easing investor concerns and paving the way for increased investment in renewable energy projects, including wind. We added to the position at the start of the year, again with a longer-term view, and the subsequent announcement has validated this conviction. The clearer policy framework is expected to stimulate new turbine orders, driving optimism around Vestas’ growth prospects and lifting the shares sharply higher.

Kainos Group (+27%) delivered strong performance following an encouraging trading update that positioned the technology consulting and software development firm at the top end of market expectations. 

The company anticipates revenues for the fiscal year to reach the upper bound of consensus estimates, which currently range between £378 million and £393.4 million. The positive outlook was fuelled by robust sales performance across its key divisions.

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

* Source: FE Analytics, as at 30.09.25, total return, net of fees and income reinvested.

** Source: FE Analytics, as at 30.09.25, primary share class, total return, net of fees and income reinvested.