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Liontrust Balanced Fund

Q2 2021 review
Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

The Liontrust Balanced Fund returned 10.1%% over the quarter, versus its average peer in the IA Mixed Investment 40%-85% Sector, which returned 5.0%*.

US equity markets continued their strong rally but were driven more by the secular growth areas of the market as opposed to the more cyclical areas which have dominated in recent quarters. The more cyclical and reflationary factions of the market have enjoyed a strong run after the vaccination efficacy announcements last October and thanks to the Democrats’ more stimulatory agenda catalysed by a Biden presidency last November and the Georgia Senate election run-off seats in January. The dominant debate this year, so far, has surrounded inflation and whether the pick-up in inflation we have seen is transitory in nature or something more structural which will cause the Fed to tighten monetary policy quicker than otherwise might have been expected. Alongside evidence that the US economy is bouncing back from the pandemic extremely impressively, growth in 2021 is likely to be fastest in almost 40 years, fears over inflation had driven 10-year US bond yields up to c.1.75% by the end of the first quarter, rising by 0.83% in just three months. Inflationary fears have subsided during this latest quarter, with investors deducing that many of the factors that are causing the current pick-up in inflation will be more temporary in nature (e.g. supply chain shortages). Bond yields subsequently subsided helping the more secular growth areas of the market over the quarter.

The swift economy reopening in the US has been helped by the impressive vaccination rollout. By the end of June over 2/3rds of US adults had received at least one dose and this has spurred a sharp reduction in daily Covid case counts and hospitalizations since the start of the year. The Delta variant has however inevitably found its way to the US and by the end of the quarter was thought to account for 20% of all cases. This will rise and could cause a speedbump to the rapid reopening where US consumers are sitting on substantial savings and have shown clear appetite to spend their stimulus cheques.

As has been commented on in previous quarters, the Fund maintains it overweight to technology-related stocks or those companies utilising technology to gain a competitive advantage versus industry peers. Indeed, from a sector perspective, technology was the most significant contributor to the outperformance of the Fund over the period. At the stock level, the top performers over the quarter were NVIDIA (+49.7%), Alphabet (+18.2%), Microsoft (+14.9%) and Amazon (+11.0%). Alphabet posted strong returns over the period, driven by another set of strong results in Q1, during which Google’s parent company exceeded estimates as advertising revenues picked up amid the broad vaccine-driven recovery.

Alphabet lagged its FAANG peers in 2020, with its fortunes seen as more closely tied to economic reopening. Google’s ad revenues subsequently rose more than 30% over the first three months of the year, to $44.6 billion, as that long talked-about pent-up demand started to be released, and this has made Alphabet the best-performing FAANG year to date. We think Alphabet stands out because the core Google Search business makes the internet a more efficient place through its indexation and democratisation of information.

PayPal was also a strong performer over the quarter, with the company posting record-breaking first-quarter figures, with net revenues up 29% and 14.5 million Net New Active Accounts added, ending the period with a 21% increase in accounts to 392 million. The company said these results show ongoing momentum as the world moves further towards a digital economy. Furthermore, the addressable market continues to grow as it launches new products and services for those hundreds of millions of accounts. Again, thanks to this Q1 performance, PayPal was able to raise its full-year 2021 guidance.

On the other side of the ledger, detractors to performance included RingCentral, Tencent and Ping An Insurance. Tencent (-4.0%) along with other Chinese stocks, Ping An Insurance (-16.4%), Alibaba (-0.1%) and Baidu (-3.5%) all collectively suffered from both exposure to a more sluggish quarter for Chinese equities (with the MSCI China Index returning 2.1% vs 7.3% for MSCI world) but also further clampdown and regulatory control from the Chinese Communist Party. While the nature of the relationship between these companies and the state is complex and fairly opaque to outside investors, they still remain, in our opinion, great companies with massive market opportunities. The risk of further governmental intervention remains but so too does the fact that it is in no-ones interest to cripple these critical components of China’s geopolitical power.

The dominant debate this year, so far, has surrounded inflation and whether the pick-up in inflation we have seen is transitory in nature or something more structural. We continue to believe, like many, the best protection against inflation is to own strong companies with competitive advantages and pricing power allowing them pass inflating costs down the chain.

Furthermore, we continue to be very positive on the outlook for quality growth stocks over the next year. We are especially positive as the large and mega cap area of the market continues to give considerable scope for further outperformance as the world continues to recover from the Covid-19 pandemic. Our emphasis on the drivers of Science, Intellectual Property, New Deep Technology, Positive Social Change and Entrepreneurial Vision will, we believe, guide the Fund towards those companies that will change the world as we adapt going forward.

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








Liontrust Balanced C Acc






IA Mixed Investment 40-85% Shares













*Source: FE Analytics as at 30.06.21


**Source: FE Analytics as at 30.06.21.

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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. Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.


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.

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