Liontrust UK Growth Fund

The Liontrust UK Growth Fund returned -5.8%* in June. The FTSE All-Share Index comparator benchmark returned -6.0% and the average return in the IA UK All Companies sector, also a comparator benchmark, was -7.3%.

The UK market suffered its worst monthly fall of 2022 so far as investors increasingly viewed aggressive central bank action on inflation as likely to tip the economy into recession.

While the FTSE All-Share Index’s total return is -4.6% year-to-date (and -6.4% in price terms), several other global equity indices – including the S&P500 – are close to, or below, the 20% drop which is often used to arbitrarily define a bear market.

In this risk-off environment, the more defensive areas of the UK market such as healthcare (+2.0%), telecoms (+0.1%) and consumer staples (-2.0%) were the most resilient. This year’s trend of large-cap outperformance was also extended: the FTSE 100’s -5.5% return takes its year-to-date performance to -1.0%, but the FTSE 250 returned -8.3%, taking it to -19.4% for 2022, with its price drop of 20.5% sitting the wrong side of that bear market line.

The energy sector has been the UK market’s strongest area by some margin this year as the Ukraine war has disrupted supply, but this support turned to a headwind in June. Having almost doubled over the prior 12 months, the Brent crude oil price slipped 6.5% to $115 a barrel during June. The Fund’s sector holdings weakened; Shell (-10%) and BP (-11%) registered double-digit percentage losses and John Wood Group (-35%) fell heavily despite announcing the disposal of its built-environment consulting business for $1.9bn, having put the unit up for sale earlier this year. Petrofac (-21%) also dropped as the oil price trend compounded negative sentiment created by a late-May AGM statement which flagged the impact of cost pressures on the outlook for 2022 performance.

EMIS Group (+43%) was the latest portfolio beneficiary of takeover interest as its Board recommended a £1.24bn offer from US-based healthcare and insurance provider UnitedHealth Group. The cash offer of 1925p a share is 29% above the level prior to its announcement and 32% higher than EMIS’s prior all-time high of 1460p. The deal is expected to complete by the end of the year; shares in EMIS jumped to trade at a small discount to the offer price.

Ultra Electronics Holdings (+6.9%) recommended a takeover offer from defence sector peer Cobham last year, but the deal is subject to government approval. There was positive news on this front in June as the Secretary of State for Business, Energy and Industrial Strategy announced that he is minded to accept the national security undertakings offered by Cobham. Formal approval is now expected to follow a public consultation which ends in July. Having traded below £31 prior to the announcement, shares in Ultra Electronics jumped to within 50p of the £35 offer price. 

Things have so far gone less well for Next Fifteen Communications (-17%) in its pursuit of M&C Saatchi. A share price slide since it made a cash-and-shares offer for M&C Saatchi mean that its bid is now worth less than the prior offer made by AdvancedAdvT Limited, an acquisition vehicle chaired by Vin Murria, also a director of M&C Saatchi. In response to the falling implied value of Next Fifteen Communication’s bid, the Board of M&C Saatchi has withdrawn its prior recommendation of the offer. Next Fifteen Communications has maintained its offer despite the share price fall and loss of Board support. It also issued a statement commenting that trading is strong and that adjusted profit before tax is ahead of management expectations.

A BAE Systems (+10%) trading update maintained the 2022 financial guidance issued back in February, but also highlighted the strength of order intake, especially for long-term programmes, as many key countries announced increased spending on defence.

Positive contributors included:

EMIS Group (+43%), BAE Systems (+10%), Ultra Electronics Holdings (+6.9%), AstraZeneca (+3.3%) and GSK (+1.9%).

Negative contributors included:

John Wood Group (-35%), Synthomer (-27%), Petrofac (-21%), Next Fifteen Communications (-17%) and TI Fluid Systems (-17%).

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

Past performance does not predict future returns

*Source: Financial Express, as at 30.06.22, total return (net of fees and income reinvested), bid-to-bid, institutional class.

**Source: Financial Express, as at 30.06.22, total return (net of fees and income reinvested), bid-to-bid, primary class.

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.

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.