Liontrust UK Growth Fund October 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 0.6%* in October. The FTSE All-Share Index comparator benchmark returned 1.8% and the average return in the IA UK All Companies sector, also a comparator benchmark, was 0.3%.

Supply chain bottlenecks and inflationary pressures remained on the agenda through the month but equity markets drifted higher as investors wait to see what action central bankers might take. The MSCI World Index of developed markets notched up a 3.9% gain, while the FTSE All-Share rose 1.8% - a gain led by the 2.2% rise in the FTSE100.

A couple of the Fund’s largest risers were driven by upgrades to guidance within Q3 updates. Indivior (+13%) upgraded its 2021 financial guidance as its new product Sublocade continues to experience rapid growth from a small base whilst market share loss in its legacy opioid-addiction treatment Suboxone remains limited; net revenues are expected to be $750m - $770m, up from $705m - $770m, and pre-tax profit is simply forecast to be a “higher level than previous management expectations”. Bunzl (+10%) upgraded full-year guidance to “slight” underlying revenue growth. It generated 2.5% underlying revenue growth in Q3, as 12% growth in the base business offset a 9.4% drop in its best-selling Covid-19 related products. Bunzl provides outsourced procurement and distribution of essential everyday items that are not for resale such as packaging, labels, cleaning & hygiene products and personal protection equipment. We own the shares for the strength of its distribution network. Better-than-expected Q3 cost control at GlaxoSmithKline (+7.5%) allowed it to raise adjusted EPS growth guidance (excluding Covid-19 solutions) to between -2% and -4%, up from a mid-to-high single digit decline. Covid-19 solutions are expected to contribute 7% to 9% this year.

Future (-4.4%) also upgraded 2021 guidance to be at the top end of analysts’ expectations, driven by momentum in digital advertising. Shares in the company have performed very well since the release of results in May, and they gave back some ground in October despite the upgrade.

A couple of the Fund’s financial services holdings moved higher on solid quarterly updates on assets under management. Brooks Macdonald Group (+10%) stated that funds under management rose 2.2% to £16.8bn in the three months to 30 September; investment performance accounted for 140 basis points of the increase with the rest coming from net new business. Hargreaves Lansdown (+7.4%) also posted a solid rise in assets under administration, with new inflows and market movements contributing fairly equally to a £2.5bn increase in assets to £138bn.

The largest portfolio detractor was Petrofac (-20%), as it gave back some of the 60% share price gain it made in September on the back of reaching a plea agreement with the UK Serious Fraud Office. This retracement came as it announced a £200m placing at a 27% share price discount. The proceeds will be used to pay the £77m SFO fine and to pay down debt as Petrofac undertakes a refinancing plan.

Pearson (-15%) shares fell on the release of a Q3 trading update that maintained full-year guidance. Underlying revenue growth in the first nine months of 2021 was 10% following growth in a number of divisions such as Virtual Learning and English Language Learning, but investors were concerned by the ongoing drop in US Higher Education Courseware, where sales fell by another 9%.

Wm Morrisons Supermarkets left the portfolio as its £10bn sale to US private equity investors completed.

Positive contributors included:

Indivior (+13%), Brooks Macdonald Group (+10%), Bunzl (+10%), Next Fifteen Communications (+9.6%) and Hargreaves Lansdown (+7.4%)

Negative contributors included:

Petrofac (-20%), Pearson (-15%), WH Smith (-8.8%), John Wood Group (-7.2%) and Future (-4.4%).

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

	Sep-21	Sep-20	Sep-19	Sep-18	Sep-17
Liontrust UK Growth I Inc	26.1%	-11.0%	3.0%	9.4%	11.5%
FTSE All Share	27.9%	-16.6%	2.7%	5.9%	11.9%
IA UK All Companies	32.4%	-12.8%	0.0%	5.5%	13.6%
Quartile	3	2	2	1	3

*Source: Financial Express, as at 31.10.21, total return (net of fees and income reinvested), bid-to-bid, institutional class.

**Source: Financial Express, as at 30.09.21, 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.