The Economic Advantage Process | What we offer | Liontrust Asset Management PLC
Liontrust - Economic Advantage

The Economic Advantage process

Anthony Cross, Julian Fosh, Victoria Stevens & Matt Tonge

Investment philosophy

A fundamental principle of competitive markets is that profits regress to the mean. The fund managers believe  the secret to successful investing is to identify those few companies that have a durable Economic Advantage which allows them to defy this principle and sustain a higher than average level of profitability for longer than expected. This surprises the market and can lead to strong share price appreciation.

Economic Advantage is the collection of distinctive characteristics of a company that competitors struggle to reproduce even if those competitors have understood the benefits arising from those characteristics.

In the fund managers’ experience, the hardest to replicate characteristics fall into the following three categories of intangible assets:

  1. 1

    Intellectual property

  2. 2

    Strong distribution channels

  3. 3

    Significant recurring business

Other less powerful but nonetheless important intangible strengths include: franchises and licenses; good customer databases and relationships; effective procedures and formats; strong brands and company culture. These intangible assets produce barriers to competition, protect margins and are capable, in the opinion of the fund managers, of reaping a financial advantage in the form of cash flow returns in excess of the cost of capital. The market rewards excess profitability, particularly when it is higher than consensus expectations.


Investment process

The fund managers evaluate companies in the UK stock market for their possession of durable Economic Advantage. Companies must possess at least one of the main advantages: intellectual property, strong distribution or recurring business (at least 70% of annual turnover).

The fund managers measure the universe of Economic Advantage companies for the market’s appreciation of their potential earnings growth. Under-appreciated companies have the strongest potential for share price growth. Companies can be under-appreciated on three different measures: surprising earnings growth, under-estimation of future recovery in earnings and re-rating of highly profitable companies.

Every smaller company held in the Economic Advantage funds has at least 3% of its equity held by main board directors. Companies are also assessed for employee ownership below the board and changes in equity ownership are monitored.

Process document

Further information can be found in the Liontrust Economic Advantage Process document.

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Liontrust Economic Advantage team
Anthony Cross, Julian Fosh, Victoria Stevens & Matt Tonge
The Economic Advantage team

Anthony Cross and Julian Fosh have won multiple awards and have 55 years of combined investment experience. Anthony was previously at Schroders and Julian was at Saracen Fund Managers. Victoria Stevens was previously deputy head of corporate broking at FinnCap and Matt Tonge was formerly an award winning trader.

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3 success stories and 3 to watch

Matt Tonge

18 months on from the Fund’s launch, Matt Tonge takes a look at three ‘success stories’ which have already graduated from the micro cap space and highlights three ‘ones to watch’ from the companies the team has bought so far this year. Read more

Awards and ratings

FE Alpha Manager 2017 - Best UK Smaller Companies Manager
Anthony Cross & Julian Fosh
FE Alpha Manager Awards 2017

Best UK Smaller Companies Manager

FE Alpha Manager 2015 - Best in UK Equity - Anthony Cross
Anthony Cross & Julian Fosh
FE Alpha Manager Awards 2017

Best in UK Equity

FE Alpha Manager 2017 - Anthony Cross
Anthony Cross
FE Alpha Manager 2017
FE Alpha Manager 2017 - Julian Fosh
Julian Fosh
FE Alpha Manager 2017
Citywire rated AAA
Anthony Cross & Julian Fosh
Citywire Manager rating: AAA
Fund Calibre Elite Provider - Equities
FundCalibre Elite Provider for equities
Special Situations & UK Smaller Companies funds
Money Observer Fund Awards - Best Larger UK Growth Fund - Liontrust Special Situations
Liontrust Special Situations Fund
Money Observer Fund Awards 2017
Best Larger UK Growth Fund
SharingAlpha - Highly Rated Fund
Liontrust Special Situations Fund
SharingAlpha: Highly Rated
Liontrust Special Situations - 2017 AJ Bell Fund & Investment Trust Awards
Liontrust Special Situations Fund
AJ Bell Fund & Investment Trust Awards 2017
Overall winner - UK Equity

Latest fund updates

The Economic Advantage team

Read the latest fund updates from the Economic Advantage team.


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Rayner Spencer Mills - R Rated Fund
Liontrust Special Situations Fund
RSM rated
Investors Chronicle - Top 100 Funds 2015 - Liontrust Special Situations
Liontrust Special Situations Fund
Investors Chronicle - Top 100 Funds 2015
(Includes Liontrust GF Special Situations Fund)
Portfolio Adviser Fund Awards 2017
Liontrust Special Situations Fund
Portfolio Adviser Fund Awards 2017
Gold UK Equity
Morningstar Awards 2015
Liontrust UK Smaller Companies Fund
Morningstar - Best UK Small/Mid Cap Equity Fund 2015
Morningstar Awards 2016
Liontrust UK Smaller Companies Fund
Morningstar - Best UK Small/Mid Cap Equity Fund 2016
What Investment Awards 2016 - Fund Manager of the Year - Julian Fosh & Anthony Cross
Anthony Cross & Julian Fosh
What Investment Awards 2016
Fund Manager of the Year
What Investment 2016 - Best UK Smaller Companies Fund - Liontrust UK Smaller Companies Fund
Liontrust UK Smaller Companies Fund
What Investment Awards 2016
Best UK Smaller Companies Fund
Investment Adviser 100 Club - Liontrust UK Smaller Companies Fund
Liontrust UK Smaller Companies Fund
Investment Adviser 100 Club
UK Smaller Companies Fund of the Year

Disclaimer:
• Past performance is not a guide to future performance. • Do remember that the value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.  • Some of the Funds managed by the Economic Advantage Team invest in smaller companies and companies traded on the Alternative Investment Market.  These stocks may be less liquid and the price swings greater than those in, for example, larger companies. • The performance of the Liontrust GF UK Growth Fund may differ from the performance of the Liontrust UK Growth Fund and will be lower than its corresponding Master Fund due to additional fees and expenses. 

• The information and opinions provided should not be construed as advice for investment in any product or security mentioned.  • Always research your own investments and consult with a regulated investment adviser before investing.


Citywire information is proprietary and confidential to Citywire Financial Publishers Ltd ('Citywire'), may not be copied and Citywire excludes any liability arising out of its use. © 2017 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.  Past performance is no guarantee of future results.

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