Liontrust Special Situations Fund

The Liontrust Special Situations Fund returned 0.5%* in January. The FTSE All-Share Index comparator benchmark returned -0.8% and the average return in the IA UK All Companies sector, also a comparator benchmark, was -0.9%.

The vaccine roll-out continued apace in the UK, and there was some evidence emerging by the end of the month that cases of the virus had peaked. Given the threat from different variants of the virus, Prime Minister Johnson refrained from setting out a set timetable for the reopening of the economy but the speed of the vaccination programme gave investors reasons to be optimistic.

There were trading updates from a number of the Fund’s biggest movers. Next Fifteen Communications Group (+18%) saw its shares rise after stating that the final quarter of its financial year ending 31 January 2021 was ahead of management’s expectations. The digital marketing specialist expects revenue to increase 9% and noted “strong growth” in profit margins, led by robust performances from its B2B technology focused agencies such as Activate, Twogether and Agent3. It added that it feels cautiously optimistic about trading in the next financial year as it capitalises on opportunities arising from the transition to an increasingly digital-driven economy.

dotdigital Group (+12%) is another holding which has been resilient through the pandemic. It recorded a 22% increase in organic revenue from continuing operations in the six months to 31 December 2020. The company, which provides software-as-a-service for omnichannel marketing automation, said adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) and adjusted profit are both expected to be in line with elevated market expectations. Like Next Fifteen, dotdigital commented that it stands to benefit from the acceleration towards a digital economy resulting from the pandemic.

Unlike Next Fifteen and dotdigital, recruitment company Robert Walters (+16%) has found trading to be more difficult during the pandemic. In a fourth quarter trading update it reported a 24% decline in net fee income as market conditions remained challenging. However, this was an improvement from the 33% and 31% respective falls in the second and third quarter. In addition, the company delivered on its cost reduction targets meaning full-year profit is now likely to be ahead of expectations.

Covid-19 also weighed on gift packaging specialist IG Design’s (-20%) trading, as it reported a 9.2% decline in revenues (excluding its recent acquisition of CSS Industries) for the nine months to 31 December 2020. Despite this, there were encouraging signs with Christmas products performing robustly and the craft and creative plays segment in the US showing strong momentum. The group maintained its full-year guidance, noting continued macroeconomic uncertainty.

Both Learning Technologies Group (-9.7%) and Aggreko (-6.6%) ended the month lower despite indicating that their results are expected to come in ahead of consensus. Learning Technologies, a provider of digital learning and talent management, said a strong performance at the end of the year means the group expects to deliver revenue no less than £131m and adjusted EBIT of at least £40m. Cash levels were also much higher than market forecasts, leaving it in a strong position to continue with its acquisition strategy.

Temporary power company Aggreko said that the recovery in trading activity continued towards the end of 2020, leaving full-year pre-tax profit on track to exceed its £80m-£100m guidance. However, the group maintained its profit forecast of £170m-£190m for 2021, which perhaps disappointed the market.

Sustainable investor Impax Asset Management (+15%) saw a 25% increase in assets under management (AuM) in the fourth quarter, taking its total to a new record high of £25bn. The AuM figure was boosted by £2.8bn from net inflows and £2.2bn from market performance.

Positive contributors included:

Next Fifteen Communications (+18%), Robert Walters (+16%), Impax Asset Management (+15%), dotdigital Group (+12%) and Hargreaves Lansdown (+12%).

Negative contributors included:

IG Design (-20%), Learning Technologies Group (-9.7%), Coats Group (-8.6%), Aggreko (-6.6%) and TP ICAP (-6.4%).

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

*Source: Financial Express, as at 31.01.21, 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 31.12.20, total return (net of fees and income reinvested), bid-to-bid, primary class.

KEY RISKS

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Some of the Funds managed by the Economic Advantage team invest primarily 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 GF UK Growth Fund may differ from the performance of the UK Growth Fund and will be lower than its corresponding Master Fund due to additional fees and expenses.

DISCLAIMER

The information and opinions provided 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. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.