Liontrust European Dynamic I GBP Acc
Why is this fund on our radar?
Liontrust European Dynamic is an actively managed all-cap European equity fund where the manager seeks to identify companies able to generate cashflow above the level required to sustain growth, with low valuations and with a well thought out approach to capital allocation. The very active approach means that it often provides a very different set of exposures to active and passive funds exposure to Europe, reflected in its relatively low correlation score. In fact, one could regard the fund as an ‘all-weather’ strategy designed to identify attractive returns from it’s investments across different industries and economic cycles. Performance in recent years shows that the management team have utilised their tried and tested investment process to navigate the market well, notably outperforming the index and peer group in period when active management on average, has struggled to keep up. This is reflected in the fund’s very high ‘batting average’ score for consistency, and this along with the low correlation to the benchmark has helped it make our list. We think Liontrust European Dynamic could be utilised on its own as a highly active exposure to European equities, or as a complimentary fund for investors with an existing European exposure, perhaps balancing a fund with a more ‘core’ focus, or even a passive strategy.
Skip to Our VerdictPerformance
Liontrust European Dynamic has produced strong performance results over the short and long term. In 2025 there has been a resurgence of interest in European equities from investors, with strong inflows into equities. However, the performance of some of the mega-cap global companies that have been the main drivers of European markets in recent years, has been mixed in 2025, providing opportunities for active managers to add significant value. With the index up c. 11% in the year to 31/07/2025, the fund has delivered significant outperformance, with a total return of 16%, with the portfolio positioned in more domestically focused areas such as financials, with five banks in the top ten holdings rising by an average of 60%. Over the longer-term, the Liontrust European Dynamic fund has outperformed its peer group and benchmark over 1,3,5 and 10 years, with those long-term periods being marked by a number of events that the fund’s constantly evolving approach is well-suited to navigating. The chart below shows the performance relative to a passive exposure to Europe. Over five years Liontrust European Dynamic’s annualised return is c. 16.1% compared to 9.6% for its actively managed peer group and 12.0% for a passive exposure. The peer group’s underperformance is a good signal that this has been a difficult time for active managers, and this makes LEDF’s outperformance all the more meaningful.
10-year peformance relative
Past performance is not a reliable indicator of future results
Portfolio
The fund’s approach generally leads to it looking very different to passive funds, and one simple way to visualise this is in the typical size of company that it invests in, with c. 60% of investments being large caps, just under 30% mid-caps and c. 8% small caps. By contrast, a passive exposure doesn’t include any small caps and the mid-cap weighting is around 10-15%. As such, one can immediately see that the fund provides a very different set of exposures to the index. At a sector level, this currently manifests itself in the large overweight positions in industrials and consumer discretionary. As is often the case, success stories from the industrial sector can often be seen as industrial technology, and one of the fund’s most successful recent picks, Wartsila, is a good example of this, providing high efficiency engines capable of using a variety of fuels including biofuels in areas such as marine and backup power, for example for datacentres.
Wartsila is also a good example of the fund finding growth opportunities in the mid-cap space, although on its current trajectory it may soon be classified as a large-cap. Similarly, defence orientated industrial Kongsberg Gruppen has given the fund exposure to the defence theme, while avoiding some of the frothier valuations in this area. Notably, LEDF is underweight many of the mega-cap stocks which helped drive European indices over recent years, but which have largely fallen behind in 2025, with significant underweights to familiar names such as Novo Nordisk, Roche, Nestle, ASML and SAP.
sector exposure
Our Verdict
Liontrust European Dynamic Fund’ s managers James Inglis-Jones and Samantha Cleave have built a strong track record over many years, but we think performance in the last five years has been particularly impressive, taken in the context of a rapidly evolving macro and geopolitical backdrop together with large swings in investor sentiment, both negative and more recently, positive. The team’s investment approach, which they refer to as ‘Cashflow Solutions’; centres around identifying companies able to generate cashflow above the level required to sustain growth, with low valuations. This has resulted in strong long-term performance but has also seen the fund capturing strong outperformance in 2025 as investors have rotated into Europe, partly attracted by lower valuations compared to the US and partly by the improving prospects for domestic economic growth in, principally, Germany. If the market rally continues and broadens out, we would expect the fund’s overweight position in mid and small caps to provide further outperformance. Over $40bn of capital has flowed into European equities in 2025, almost entirely focused on large caps, and it would only take a small proportion of this to be allocated to mid- and small-caps to create an additional tailwind. Liontrust European Dynamic Fund looks like an excellent way to capture a further recovery in European equities.
Key Risks
- A concentrated portfolio exposes investors to greater stock specific risk
- European market’s positive recent performance is built on fragile economic performance and government stimulus
- Portfolio has relatively high exposure to mid- and small-caps, which could lead to higher volatility
