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Liontrust Balanced Fund

Q3 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 2.2%% over the quarter, versus its average peer in the IA Mixed Investment 40%-85% Sector, which returned 1.3%*.

US equity markets continued to rally this quarter but were led by more defensive parts of the market as opposed to the more cyclical areas which dominated at the end of last year and the beginning of this. The dominant debate this year continues to be around 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. One of the drivers of inflation has been the widely reported supply chain challenges and indeed US company earnings that were reported in the early part of this quarter began to show the impact. Supply chain challenges have included, amongst others, the shortage of semiconductor chips, logistics bottlenecks, labour shortages and subsequent wage pressure. Despite many of the companies we own, with strong pricing power, have looked to address this with price increases, these impacts are beginning to show up in their margins.

A related debate that has raged in recent months is whether the economic momentum that has been so strong in the US since the summer last year is already tailing off. The Delta Covid-19 wave has certainly slowed and in some cases reversed momentum in the re-opening of the US economy. The good news here is that by the end of September, it is looking likely that the US is past the worst of the Delta wave with the case count around a third lower than the Delta peak at the end of August and hospitalisations almost a quarter lower.

Elsewhere, UK equities started the third quarter well, bolstered by strong second quarter earnings reported across the majority of sectors. As we entered the quarter, earnings revisions ratios for UK companies reached fifteen-year highs, indicating that UK companies had weathered the Covid storm better than many had feared. This earnings momentum injected a degree of optimism into the market, as did the restoration of UK dividends, which have recovered to one sixth below pre-Covid levels.


Since September, however, along with other global markets, we have seen the majority of these gains erased. Central to this observation has been the pace of inflation (which climbed to 3.2% in August), closely tied to the direction of interest rates and bond yields, and consequent valuation support for equities. In the past month we have seen a sharp rebound in UK bond yields, which surpassed 1% for the first time since May 2019 as the Bank of England took a more hawkish stance on monetary policy to combat inflation. Companies across the industry spectrum continued to report cost inflation pressures, citing supply-chain bottlenecks caused by the disruption of the pandemic.

Adding to recent uncertainty, the regulatory crackdown in Beijing on companies on the wrong side of the theme of ‘common prosperity’ has created concerns beyond China, given the region’s critical importance as both manufacturer and end consumer for many multi-national companies. 


Alphabet was the top performer over the quarter although was among the stocks pulled down in the indiscriminate tech selloff in the latter part of September. The company posted yet another set of strong results for Q2, with revenues of $61.9 billion, reflecting elevated consumer online activity and broad strength in advertiser spending.


Microsoft was also among the top performers over the quarter as the company reported sales and profit that exceeded estimates for a 10th straight quarter, sending shares higher after some investors were initially spooked by signs of slowing growth in the software giant’s Azure cloud-computing business. Sales in the fourth quarter, which ended June 30, climbed 21% to $46.2 billion, higher than the average estimate of $44.3 billion.


Palo Alto Networks produced a strong quarter, albeit slightly dented at the end, with a share price jump when the company announced results on 23 August. For fiscal year 2022, it expects total billings in the range of $6.60 billion to $6.65 billion, representing year-on-year growth between 21% and 22%. Palo Alto provides technology to protect our digital way of life, with its firewall product consistently rated the best by Gartner and the company achieving high customer satisfaction scores.

Tencent, along with Alibaba continue to suffer from increased investor nervousness over Chinese regulation. Beijing has continued to flex its control over the economy, stressing its goals of common prosperity, while also putting in place regulation spanning finance, education and gaming all of which have impacted these tech giants. While these Chinese stocks continue to be somewhat volatile and unpredictable in the short to medium term, the underlying companies still remain, in our opinion, strong with massive market opportunities. The risk of further government intervention remains but so too does the fact that it is in no-one’s interest to cripple these critical components of China’s geopolitical power. In portfolio terms, we can manage these risks (and asymmetrical upside opportunity) with very modest portfolio positioning.

We continue to be very positive on the outlook for quality growth stocks over the coming years. We are especially positive as the large and mega cap area of the market continues to give considerable scope for 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 30.09.21


**Source: FE Analytics as at 30.09.21. Quartiles were generated on 07.10.21.

Understand common financial words and terms See our glossary
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.
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.  


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. 
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