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Key takeaways
- European equities finished December on a firm footing, supported by improving sentiment and expectations of policy stability into 2026.
- Financials were a key driver of Fund performance, led by UBS Group and UniCredit.
- Outside financials, AP Moller-Maersk and Wartsila also performed strongly, helped by broker rating upgrades.
Performance
The Fund returned 4.7% in sterling terms in December. The MSCI Europe ex-UK Index comparator benchmark returned 2.4% and the average return made by funds in the IA Europe ex-UK sector, also a comparator benchmark, was 2.0%.
Commentary
European equities ended December on a constructive note, with the market supported by improving macro sentiment and expectations for policy stability into 2026. The European Central Bank kept rates unchanged and reiterated a careful stance as inflation cools and growth remains fragile. Elsewhere, US markets absorbed a quarter-point Fed cut, but a more cautious outlook on further easing left rate expectations finely balanced into 2026.
European markets were led by financials (+6.0%), alongside solid contributions from industrials (+2.5%) and consumer discretionary (+2.0%), with more modest gains from health care (+1.1%), information technology (+1.0%) and utilities (+0.8%). The weakest segments were real estate (-1.1%), consumer staples (-1.0%), energy (-0.8%) and communication services (-0.7%), while materials was broadly flat.
Financials were a standout contributor to Fund performance over the year, with the sector again delivering strong returns in December and featuring prominently among the Fund’s best-performing holdings. UBS Group (+19%) and UniCredit (+10%) led the gains, supported by further strength from Banco Santander (+8.6%), Caixabank (+8.3%) and Deutsche Bank (+7.8%).
With regard to specific newsflow, UBS Group shares moved higher on expectations that the Swiss government may soften parts of its proposed banking reforms that would have increased UBS’s required capital buffer. The adjustment appears focused on how certain balance-sheet items, such as deferred tax and software assets, are treated, which could meaningfully reduce the additional capital UBS would need to hold. While a major element of the package, requiring greater capitalisation of foreign subsidiaries, is still expected to proceed, the prospect of a lower overall capital burden was viewed positively by the market.
Away from the financials sector, Danish shipping giant AP Moller-Maersk (+13%) and Wartsila (+8.6%), the Finnish provider of technologies and lifecycle solutions for the marine and energy markets, also ranked among the top performers following a ratings upgrade from covering analysts.
Positive contributors to performance included:
UBS Group (+19%), AP Moller-Maersk (+13%) and UniCredit (+10%)
Negative contributors to performance included:
Technip Energies (-3.9%), Ahold Delhaize (-2.5%) and Geberit (-1.1%)
Discrete years' performance (%) to previous quarter-end**:
| Dec-25 | Dec-24 | Dec-23 | Dec-22 | Dec-21 |
Liontrust European Dynamic I Inc | 29.3% | 2.8% | 16.9% | 0.7% | 24.0% |
MSCI Europe ex UK | 26.2% | 1.9% | 14.8% | -7.6% | 16.7% |
IA Europe Excluding UK | 22.5% | 1.7% | 14.0% | -9.0% | 15.8% |
Quartile | 1 | 2 | 2 | 1 | 1 |
*Source: Financial Express, as at 31.12.25, 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 31.12.25, total return (net of fees and income reinvested), bid-to-bid, primary class.
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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.
- 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.
- The Fund, may in 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. 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.
- Credit Counterparty Risk: 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.
- Concentration Risk: the 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.
- Liquidity Risk: 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.
- ESG Risk: there may be limitations to the availability, completeness or accuracy of ESG information from third-party providers, or inconsistencies in the consideration of ESG factors across different third party data providers, given the evolving nature of ESG.
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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.
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