Liontrust UK Growth Fund June 2021 review | Insights

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 UK Growth Fund returned 1.5%* in June. The FTSE All-Share Index comparator benchmark returned 0.2% and the average return in the IA UK All Companies sector, also a comparator benchmark, was -0.2%.

The UK equity market added modestly to this year’s strong gains as investors waited to see whether the inflationary forces emerging from the economic recovery are likely to prompt any action from central banks. The constant uncertainty on the public health front also remains, with much debate over the interaction of the spread of new Covid-19 strains such as the delta variant and the planned removal of social restrictions.

One asset class that did move decisively higher was commodities. As supply chains struggle to keep pace with resurgent demand, prices for energy, basic metals and agricultural commodities have all risen substantially this year. In June, Brent crude rose 8.4% to US$75.1 a barrel, aided by Opec’s decision to restrict supply increases.

The FTSE All-Share Index’s energy sector was one of the strongest in the month, rising 5.8%. The Fund benefitted via its holdings in energy majors BP (+2.9%), and Royal Dutch Shell (+9.0%) but its participation in the strength was diluted somewhat by poorer performances from industry engineers Petrofac (-17%) and John Wood Group (-10%).

A trading statement from Petrofac showed that its order backlog had dropped from US$5.0bn at the start of the year to US$4.0bn at 31 May. The fall came in its Engineering & Construction division. The pandemic has led to lower activity levels and the recent recovery in oil prices has yet to feed through to a significant increase in its clients’ capital spending. Meanwhile, John Wood Group’s interim update revealed a 21% like-for-like revenue decline on 2020 due to the impact of the pandemic. But the engineering group commented on a solid Q1 and improving momentum in Q2 while also maintaining its full-year guidance. However, some investors were disappointed that, with this description of Q2 momentum, the company’s order book had not increased by more than 6% (to US$6.9bn) over the six months.

Fund performance in June was boosted by takeover speculation regarding a couple of its holdings. WM Morrison Supermarkets (+40%) jumped after it confirmed a private equity conditional takeover offer of 230p per share had been received and rejected by its board in mid-June. Ultra Electronics (+11%) also rose on bid speculation. Private equity-owned aerospace and defence peer Cobham stated that it was exploring a combination with Ultra Electronics, with a takeover offer being one of the routes under consideration. By contrast, shares in Renishaw (-11%) slid on some concern that the company’s sale process may not achieve the high price initially hoped for when it was announced earlier this year.

Other notable corporate releases included a trading update from digital market specialist Next Fifteen Communications (+15%). This stated that an acceleration in growth had pushed performance ahead of its expectations. Revenues rose 21% year-on-year in the three months to 30 April – including 17% organic growth – and growth accelerated further at the start of Q2.

Currency headwinds weighed on RWS Holdings (-12%) as it issued interim results covering the six months to 31 March 2021. Although adjusted profit before tax for the six months was ahead of managements’ expectations (+53% to £51m), adverse currency trends are affecting the second half of its year. The translation and language services specialist generates a significant proportion of revenues in US dollars, but the dollar has weakened relative to sterling in recent weeks.

Positive contributors included:

WM Morrison Supermarkets (+40%), Next Fifteen Communications (+15%), Ultra Electronics (+11%), Royal Dutch Shell (+9.0%) and AstraZeneca (+7.9%).

Negative contributors included:

Petrofac (-17%), RWS Holdings (-12%), Renishaw (-11%), John Wood Group (-10%) and TP ICAP (-8.7%).

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

	Jun-21	Jun-20	Jun-19	Jun-18	Jun-17
Liontrust UK Growth I Inc	18.0%	-10.2%	2.9%	11.4%	20.1%
FTSE All Share	21.5%	-13.0%	0.6%	9.0%	18.1%
IA UK All Companies	27.7%	-11.0%	-2.2%	9.1%	22.5%
Quartile	4	2	1	1	3

*Source: Financial Express, as at 30.06.21, 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 30.06.21, total return (net of fees and income reinvested), bid-to-bid, primary class.

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Key Risks

Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

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.

Disclaimer

This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.

This 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust. Always research your own investments and if you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.