Liontrust UK Smaller Companies Fund February 2022 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 Smaller Companies Fund returned -4.6%* in February. The FTSE Small Cap (excluding investment trusts) Index comparator benchmark returned -3.9% and the average return of funds in the IA UK Smaller Companies sector, also a comparator benchmark, was -5.8%.

Developments in Ukraine ensured that top-down considerations were once again the largest factor in driving stockmarket returns, as investors’ focus shifted from macroeconomic to geopolitical analysis.

From the perspective of the Economic Advantage Funds, this meant a continuation of some of the headwinds from last month. ‘Value’ continued to outperform and ‘quality’ to underperform, though to a lesser degree than in January, while larger companies outperformed smaller ones, perhaps reflecting a degree of risk-aversion returning to markets in the light of the geopolitical situation

Some of the largest portfolio detractors were again driven by investor sentiment rather than company newsflow. Of the portfolio’s five largest detractors, only Tristel (-20%) issued an update to investors during February. Its growth has been constrained by the impact of Covid-19 in reducing patient medical examinations and the knock-on effect on demand for Tristel’s medical device disinfectants. While it had been hoped that hospitals would return to pre-pandemic activity levels, Tristel’s revenues from continuing operations fell year-on-year in the six months to 31 December 2021 and the company expects demand recovery to be stop-start for the remainder of the financial year. It does, however, expect to see sequential revenue growth in the second half of the year.

Of the stronger portfolio performers in February, Clipper Logistics (+32%) was the top riser. It announced its intention to recommend a possible takeover offer from GXO comprising 690p cash and GXO shares worth around 230p for every Clipper share. XPO is a New York-listed contract logistics provider with 2021 revenues of $7.9bn. Shares in Clipper jumped 32% to trade close to the implied offer.

YouGov (+12%) also made ground in February following a short but upbeat trading update issued on 28 January. YouGov now expects results for the year to 31 July to be slightly ahead of its prior guidance. The US and mainland Europe have driven growth in the first six months of its year, with newer products and a focus on subscription sales proving particularly fruitful.

Kitwave Group (+10%) was another positive contributor. The logistics business has many customers in the hospitality and leisure sectors, so has felt the impact of public health restrictions during the pandemic. But a results announcement in February – covering the year to 31 October 2021 – came in ahead of expectations. The company also stated that the first few months of the new financial year have started positively, with trading on course to return to pre-pandemic levels.

The prospect of an era of higher defence spending has pushed shares in related stocks and sectors higher. The Fund owns shares in Cohort Group (+20%), the parent company for six defence and security technology businesses.

Positive contributors included:

Clipper Logistics (+32%), Cohort Group (+20%), Microlise (+19%), YouGov (+12%) and Kitwave Group (+10%).

Negative contributors included:

Gear4Music (-26%), EKF Diagnostics (-23%), Team17 Group (-22%), Tristel (-20%) and Focusrite (-19%).

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

Past performance does not predict future returns

	Dec-21	Dec-20	Dec-19	Dec-18	Dec-17
Liontrust UK Smaller Companies I Inc	24.7%	15.2%	31.0%	-6.0%	27.2%
FTSE Small Cap ex ITs	31.3%	1.7%	17.7%	-13.8%	15.6%
IA UK Smaller Companies	22.9%	6.5%	25.3%	-11.7%	27.2%
Quartile	2	1	2	1	3

*Source: Financial Express, as at 28.02.22, total return (net of fees and income reinvested), bid-to-bid, institutional class.

**Source: Financial Express, as at 31.12.21, 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.