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Liontrust UK Ethical Fund

Q1 2023 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 Fund returned -0.2% over the quarter, underperforming the IA UK All Companies sector average of 2.6% and the MSCI UK Index’s 3.2% (both of which are comparator benchmarks)*†.

Global equities started 2023 on a strong footing as signs of easing inflation in most major economies and China’s re-opening supported positive market sentiment. However, sentiment turned in February as resilient economic data suggested that any pause in interest rate rises may still be some way off, with the Federal Reserve, European Central Bank and Bank of England all continuing with rate rises. The collapse of Silicon Valley Bank (SVB) in March led to a major sell-off in the US and European financial sectors, though this market turbulence was short-lived and did not prevent investor optimism leading equities higher towards the end of the quarter.

As we have stated previously, we do not attempt to forecast or anticipate the macroeconomic developments we have experienced in the last two years. Our focus is resolutely on our 20 sustainability themes that over the long-term should provide strong and stable growth, relatively independent of economic cycles, and on finding those rare companies that harness this positive growth and which generate persistently high returns on capital. In the more muted economic years we expect to have ahead of us, we believe the strength of our sustainable themes and the quality of the businesses we invest in will allow for strong performance over the long-term.

Within the Fund, Mortgage Advice Bureau was a notable positive performer over the quarter following the release of full-year results showing a 22% increase in revenue to £231m, alongside a 24% rise in gross profit to £62.9m. Exposed to our Saving for the future theme, MAB had been on track for a record year of growth prior to the UK’s mini-budget announcement in September, which subsequently caused a significant fall in the company’s share price. As expected, adviser numbers fell in Q1 to 2,129, though the company expects this figure to stabilise in Q2 and it commented that current trading in its new financial year has been in line with expectations.

While there was no significant investor news related to the stock’s performance, First Derivates (FD) Technologies was also among the top performers over the quarter. Exposed to our theme of Improving the resource efficiency of industrial and agricultural processes, FD is a leading provider of products and consulting services to some of the world’s largest finance, technology and energy institutions.

The online world and the proliferation of sensors in all areas of economic and social activity is driving an explosion in data generation, but this data is only useful if it is captured and managed so that it can be analysed effectively. First Derivatives has the leading database software for time-series databases: information where the time of the event is critical. FD’s architecture can deliver a 10-20x reduction in the number of servers needed for a task and 100x improvement in speed and commensurate reductions in energy consumption.

Softcat performed strongly into the close of the quarter following a half-year update which announced operating profit was ahead of initial expectations, with full-year profits also on track to be slightly ahead of previous estimates. Exposed to our Enhancing digital security theme, Softcat is the UK's leading value-added reseller of IT software and equipment serving the fragmented SME market. The company's competitive advantage is based on its unique culture, which emphasises professionalism, meritocracy, competition and fun. This employee satisfaction drives best-in-class customer experience, high recurring revenues and rapidly increasing market share.

The Gym Group’s share price fell sharply following the release of its annual results in March which included cautious 2023 outlook comments.  Exposed to our Enabling healthier lifestyles theme, the UK’s second largest gym group  indicated that rising costs are likely to offset revenue improvements from new sites and yield improvements on its existing gyms. The company has experienced an uneven start to 2023 compared to its expectations, with membership at the end of February of 890,000, up 8.4% from the end of 2022. In addition, the company believes that it will take longer to return to pre Covid-19 levels as a result of both the changes to consumers’ everyday lifestyles and current macroeconomic headwinds. As a result, it is reducing the number of new gyms its plans to open this year.

Furniture retailer DFS was also among the detractors after lowering its annual profit forecast in its interim results announcement. Exposed to our Leading ESG management theme, DFS is the UK’s largest sofa retailer with around 36% market share; it is the biggest in both online and in-store sales with an omni-channel experience. The company explained that profits are expected to be impacted due to a reduction in orders for its made-to-order sofas and arm chairs in recent weeks as customers spend less on discretionary items amid a cost-of-living crisis.

In terms of its sustainability credentials, DFS has become the industry leader in environmental and social performance – the company is beginning to use its scale advantage to push for higher standards in raw material procurement, supply chain labour standards and customer experience. We believe this should support market share gains.

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


Past performance does not predict future returns







Liontrust UK Ethical 2 Acc












IA UK All Companies













*Source: FE Analytics, as at 31.03.23, primary share class, total return, net of fees and income reinvested.

Understand common financial words and terms See our glossary

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 Sustainable Future team involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. Investment in Funds managed by the Sustainable Future team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The value of fixed income securities will fall if the issuer is unable to repay its debt or has its credit rating reduced. Generally, the higher the perceived credit risk of the issuer, the higher the rate of interest. Some Funds may invest in derivatives. The use of derivatives may create leverage or gearing. A relatively small movement in the value of a derivative's underlying investment may have a larger impact, positive or negative, on the value of a fund than if the underlying investment was held instead.


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.

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