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Liontrust SF Managed Growth 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 Fund returned 10.1% over the quarter, outperforming the IA Flexible Investment sector average of 5.1% (which is the comparator benchmark)*.

Pace of recovery, interest rates and inflation remain dominant factors for overall sentiment, particularly the latter as levels continue to creep upwards. This is leading to growing speculation around when policy tightening will be needed but central banks continue to insist that while inflation may be higher than expected, this will be temporary and does not pose a threat to recovery.

While higher inflation tends to have a greater impact on longer-duration growth stocks, we continue to believe a well-diversified portfolio with multiple thematic drivers and high-quality companies is the best way to navigate whatever macroeconomic situation unfolds. Stage four of our investment process, concentrating on valuation, also ensures our portfolios are protected from bubbles and while we are growth focused, we are looking for structural rather than transient trends.

Asset allocation remained a positive factor over the quarter, with risk assets continuing to deliver positive returns; against this backdrop, our ongoing overweight equity and underweight cash position contributed to performance.

We largely avoid crowded trades such as the mega-cap FAANG names and, of those, only Alphabet is currently investable for us. Like last quarter, the stock was among our best performers 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. This is provided free to the vast majority of users and has become an integral part of everyday life, which is why the company sits in our Providing education theme. As a sector, technology emits more than airlines, both in the US and globally, and Alphabet also stands out here, ensuring it has energy-efficient data centres and as one of the biggest buyers of renewable energy.

Elsewhere, US healthcare business IQVIA was back among our top contributors, with the company’s data-driven strategy for outsourcing clinical trials continuing to create an important competitive advantage. Over the period, it announced record Q1 results, with double-digit growth across all key financial metrics, and on the back of this, plus sustained strength of recent new business wins, was able to raise 2021 financial guidance. IQVIA exemplifies the affordability side of healthcare within our sustainable themes, with the industry needing to ensure the treatments and innovations it develops are available to the wider global population. The company provides an important solution to the problem of increasing drug costs by improving the efficiency of clinical trials. 

Several of our best performers from 2020 also featured among top holdings again in Q2, having giving back some of their returns earlier in the year amid the value rotation. Names such as DocuSign, PayPal, Intuit and Equinix all enjoyed share price growth over the period, as well as holdings under our Connecting people theme such as Cellnex and American Tower.

DocuSign is exposed to our Increasing waste treatment and recycling theme and the company has created a unique product to digitalise the final signature part of the document production process an excellent example of a solution that makes the world more efficient. At this point, a document traditionally needs to be printed several times, then sent via mail, which is both time consuming and costly. Traditional paper-based signatures cost $37 per document on average and take around two weeks, whereas DocuSign’s product costs between $1 and $2 and 83% of documents are signed within 24 hours, and 50% within 15 minutes. The company has a 70% market share for e-signatures globally but its addressable market is around 10 times larger than current sales figures, given it is effectively competing with paper.

In its latest results, DocuSign said it has become the way people ‘agree in today’s emerging anywhere economy’, not only helping organisations to continue during the pandemic but also to realise new and more efficient ways of doing business in the future. This is reflected in 58% year-on-year revenue growth in the first quarter and the recent addition of the millionth customer on the DocuSign platform.

PayPal was another 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 – we hold the business under our Increasing financial resilience theme – and 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.

Elsewhere, Puma had a strong quarter after announcing encouraging Q1 sales and profitability growth, despite ongoing lockdown restrictions and supply chain constraints due to port congestion in the US. Sales over the first quarter were up 25.8% despite around 30% of shops selling its products in Europe and Latin America closed and the remaining 70% severely restricted – which the company said is testament to the momentum behind the brand. Looking to the rest of 2021, Puma expects to achieve full-year sales growth in the mid-teens and significantly better profitability compared to 2020.

In terms of weaker performers, other holdings impacted by Covid-19 continue to struggle in the short term, including Bright Horizons – which we added in Q1 – while names such as TechnoPro, Japan's largest technology-focused staffing and service company, have also been caught up in the value rotation.


Bright Horizons’ first-quarter revenues were down 23% compared to the same period in 2020, due to lower enrolment in childcare centres able to open and many others still temporarily closed. This is the US market leader in corporate-sponsored childcare, offering a range of products to support parents of young children in getting back to work. The company is built on the goal of partnering with employers to help ensure work-life balance and reduced stress in the early years of parenting, which is clearly a long-term part of a more sustainable future when the world is able to look past the pandemic.


Infineon has also seen its shares drop off slightly despite reporting strong results in the midst of a global shortage of computer chips, with the pandemic upending supply chains and changing consumer shopping patterns. Carmakers, a key audience for Infineon, initially cut back orders for chips while tech companies, whose products were boosted by lockdown, bought as many as they could. Infineon reported higher net profits and revenue for the second quarter of fiscal year 2021 as demand for semiconductors continues to exceed supply. CEO Reinhard Ploss noted a ‘booming’ semiconductor market, with supply constraints in its automotive segment only expected to ease in the second half of this year and lost volumes only likely to be made up in 2022.

In terms of trading, we initiated a position in US homebuilder NVR towards the end of the quarter. The company is exposed to our Building better cities theme, with 100% of NVR’s homes built in 2020 verified by an external party to be more energy efficient than the average home built that year; the average NVR home is 40% more efficient. The company is unique in the industry in that it exercises a capital-light business model by acquiring options to buy land, as opposed to having a large land bank. This is more costly in the near term but enables NVR to survive downturns in a cyclical industry; it was the only profitable homebuilder in the US during the global financial crisis. Despite industry cyclicality, NVR’s returns have been strong and disciplined capital allocation has seen the share count fall by 50% since 2005. We think the 15x multiple the market is prepared to pay for the business undervalues the culture and discipline management has demonstrated over the years.

As for sells, we exited our position in US industrial automation business Rockwell Automation. Rockwell is a great company exposed to the theme of Improving the resource efficiency of industrial and agricultural processes but after rerating from a PE of around 18x to 30x over the past couple of years, we struggled to see further upside in the shares.

We also sold our holding in Hella, the German automotive supplier that engages in the development and manufacture of lighting technology and electronic components. After falling 59% peak to trough amid the Covid selloff in March 2020, the expected recovery in auto sales drove the shares up over 150% over the next year; following this recovery, we concluded that Hella was fair value.

Late in the quarter, through a somewhat bizarre twist of fate, Knorr Bremse, which we bought in Q1, announced it is looking to acquire a large stake in Hella. Knorr Bremse is a pure play on safety across trucks and rail, and exposed to our theme of Improving transport safety as its products include electronic collision avoidance, vehicle stabilisation and networking solutions. Knorr manages to deliver operating margins in the low teens, which we expect to expand modestly over time, as well as returns on capital of 30%-plus. The company was able to post strong results for Q1 but continues to face a challenging backdrop for ‘transport’ names as lockdowns are still gradually coming to an end.

Having just exited Hella on valuation grounds, this development has taken us somewhat by surprise. We will be investigating further and will outline our conclusions in future commentaries.

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







Liontrust Sustainable Future Managed Growth
2 Acc






IA Flexible Investment












*Source: Financial Express, as at 30.06.21, primary share class, total return, sterling, net of fees and income reinvested.

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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. The majority of the Liontrust Sustainable Future Funds have holdings which are denominated in currencies other than Sterling and may be affected by movements in exchange rates. Some of these funds invest in emerging markets which may involve a higher element of risk due to less well-regulated markets and political and economic instability. Consequently the value of an investment may rise or fall in line with the exchange rates. Liontrust UK Ethical Fund, Liontrust SF European Growth Fund and Liontrust SF UK Growth Fund invest geographically in a narrow range and has a concentrated portfolio of securities, there is an increased risk of volatility which may result in frequent rises and falls in the Fund’s share price. Liontrust SF Managed Fund, Liontrust SF Corporate Bond Fund, Liontrust SF Cautious Managed Fund, Liontrust SF Defensive Managed Fund and Liontrust Monthly Income Bond Fund invest in bonds and other fixed-interest securities - fluctuations in interest rates are likely to affect the value of these financial instruments. If long-term interest rates rise, the value of your shares is likely to fall. If you need to access your money quickly it is possible that, in difficult market conditions, it could be hard to sell holdings in corporate bond funds. This is because there is low trading activity in the markets for many of the bonds held by these funds. Mentioned above five funds can also invest in derivatives. Derivatives are used to protect against currencies, credit and interests rates move or for investment purposes. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions.


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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