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Liontrust SF UK 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 3.8% over the quarter, underperforming the IA UK All Companies sector average of 5.6% and 5.8% from the MSCI UK Index (both of which are comparator benchmarks)*.

Pace of recovery, interest rates and inflation remain dominant factors for overall sentiment, particularly the latter as the level climbed to 2.1% in May, exceeding the Bank of England's 2% target for the first time in almost two years. This is leading to speculation around when policy tightening may be needed but, mirroring the Federal Reserve, the Bank of England upped its expectations for inflation but insisted this does not pose a threat to growth. Short term, the Bank said CPI inflation could breach 3%, mainly due to developments in energy and other commodity prices, but this should be transitory.

Against this backdrop, as always, we believe a well-diversified portfolio with multiple thematic drivers and high-quality companies is the best way to navigate whatever macroeconomic developments emerge. The recovery in more cyclical parts of the market continues and, as a consequence of our growth and quality focus – with higher inflation expectations also typically having a greater impact on longer duration stocks – the Fund lagged the peer group over the quarter. We remain confident our process of investing in high-quality, high-return businesses with a tailwind from enabling a cleaner, healthier and safer economy will continue to produce superior results over the long term, and even towards the latter part of the quarter, there were signs of quality/growth making up the year-to-date performance gap.

Oxford Biomedica was our strongest holding over the quarter, with the company announcing an update to the 18-month vaccine supply agreement signed with AstraZeneca in September 2020. Following successful manufacture of large-scale batches, AstraZeneca has committed to an increase in the amount required in the second half of the year. As a result, Oxford Biomedica has raised guidance for expected revenues from this deal from in excess of £50 million to over £100 million, and forecasts significant growth in EBITDA as a result. The company confirmed this commitment should not have any impact on current partnerships or its ability to secure and support new relationships in the cell and gene therapy field. As we have said before, while the vaccine grabs the headlines, the investment case for Oxford Biomedica’s shares is primarily based on other conditions its technology can treat, varying from lymphoma to Parkinson’s.

Staying in the same location, Oxford Instruments also enjoyed a strong Q2, a company whose devices support research into advanced materials, semiconductors, quantum computing and cell biology. It reported solid Q1 results in June, with revenues up 1.7% and order book growth of 13.2%, and announced the acquisition of WITec, a German provider of microscopy imaging solutions, in line with the strategy to support attractive end markets.

Other top holdings over Q2 included John Laing Group, exposed to our Building better cities theme, with shares jumping on the announcement the company is to be acquired by US private equity firm KKR. The takeover values the investor and manager of infrastructure projects at 403p a share, representing a 27% premium on the closing price of John Laing stock on the day of the announcement.

Elsewhere, Learning Technologies Group was back among our best performers over the quarter, having seen its shares flatten earlier in the year amid greater focus on value areas of the market. LTG is held under our Providing education theme, with a collection of e-learning, compliance, training and Human Resources software and content brands. The company continues to consolidate the e-learning space with a number of acquisitions designed to access new technologies, geographies and cross sell to new customers, with a deal for learning, performance and skills development platform Bridge the latest addition. Long term, we remain excited about the prospects for this founder-led business.

Another consistent performer is sustainable packaging provider Smurfit Kappa and the company recently announced underlying revenue growth of 6% for the first quarter, and strong volume growth across the majority of its sectors and markets. Against a backdrop of industry-wide shortages of supply and input cost pressures, and sharply rising paper prices, the company said its Q1 performance sets the foundation for accelerated revenue and earnings growth as we move through 2021. Smurfit has also made significant progress on sustainability targets; it is the first in its industry to target at least net zero emissions by 2050 and, compared to its baseline year of 2005, reduced emissions intensity by 37.3% by the end of 2020.

Also benefiting from strong Q1 results is St James’s Place, which announced a record quarter in terms of new business. We hold this company under our Saving for the future theme, recognising savings rates have to increase substantially if we are to avoid a huge shortfall in pension provision. SJP’s inflows for Q1 were £4.79 billion, 19% higher than the same period last year, and taking total funds under management to £135.46 billion. Highlighting the company’s commitment to sustainable investing, St James’s Place has announced Robeco as its engagement partner, providing services to SJP through dialogue with investee companies on ESG issues and sustainability risks and opportunities.

London Stock Exchange Group was also back among the top contributors, with the shares having suffered their largest one-day fall in more than 20 years in early March. In its final-year results, the company disappointed the market with cost and revenue synergy guidance over the next few years following the Refinitiv acquisition. We know the business well and believe the management team had been unfairly punished for doing the right thing – investing in their digital infrastructure, people and portfolio of solutions. Short-term investors wished to see near-term earnings accretion at the expense of the sustainability and growth of the business and the rising price over recent weeks shows the long-term case for LSE, as the global scale provider of financial data and analytics, is coming through again.

Among weaker performers, Trainline saw its shares shed a third of their value over May on the back of the UK government’s plans to create a new public sector body to oversee Britain's railways. Great British Railways will own and manage rail infrastructure, issue contracts to private firms to run trains, set most fares and timetables, and sell tickets, which could threaten Trainline’s business model as an online platform for tickets and railcards. In response, the company said it is supportive of these plans, which should provide opportunities to innovate for the benefit of customers and grow the business. The variability in outcomes for Trainline’s UK business has clearly widened and the main risk is what happens to the 5% commission rate currently in place. On the other hand, we could envisage a situation where Trainline is actually better off, should it win the government’s contract to white label the train ticket solution. Even with pressure on commission rates, the volumes Trainline would be processing in this instance could be multiples of what it was doing pre-Covid.

There are many known unknowns we will be following closely but we think the brand Trainline has built in the UK is strong and the habits of consumers to buy tickets through its app will be difficult to break. Finally, while still early days, the international business (Trainline has replicated its UK operations in Germany, Spain, Italy and France) appears to be gaining momentum and should this continue, the company will be more diverse, reducing the reliance on the UK.

Continuing the travel theme, National Express continues to struggle amid Covid-related restrictions although is obviously expecting a robust improvement in the second half of the year as vaccination efforts allow countries to open up. The company has been a solid performer since vaccine announcements last year and while the shares have flattened more recently, we believe it remains well set to take market share from weakened competition and an accelerated shift to outsource more transport services. The environmental advantages of public transport are an important factor in reducing emissions, which, along with urbanisation, should also boost growth longer term.

In terms of recent activity, we added consumer review website Trustpilot, a further purchase for Increasing financial resilience. A recent IPO, the business was founded in Denmark in 2007 to address the ‘trust gap’ on the internet. They take a neutral stance towards reviews and everyone has to follow the same rules, with a basic mission to improve trust by enabling independent communication between consumers and companies.

We also took a position in Genuit Group under our Building better cities theme, with the company changing its name from Polypipe Group in April. This is a leading provider of sustainable construction products, focusing on water, climate and ventilation management solutions.

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







Liontrust Sustainable Future UK Growth 2 Acc












IA UK All Companies













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

Understand common financial words and terms See our glossary

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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