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Liontrust UK Micro Cap Fund

May 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 Liontrust UK Micro Cap Fund returned -2.0%* in May. The FTSE Small Cap (excluding investment trusts) Index and the FTSE AIM All-Share Index comparator benchmarks returned -1.7% and -5.5% respectively. The average return of funds in the IA UK Smaller Companies sector, also a comparator benchmark, was -1.8%.


The UK market’s negative monthly return followed a sharp drop over the final week as negotiations on extending the US debt limit came very close to the wire, before ultimately being resolved at the start of June, avoiding a painful default process.


Interest rate uncertainty remained a feature of markets, with expectations at the start of the month tempered by the contractionary impact of this year’s banking crisis, before more strong economic data and evidence of inflation persistence led to additional rate hikes being priced back in for later this year. UK, European and US base rates were all raised by a 25 basis point margin in May, with the US Federal Reserve indicating that rates would now pause at the 5.0 – 5.25% level.


A trading update from Cohort (+13%) announced that performance in the year to 30 April was slightly ahead of expectations, with revenues boosted by strong demand from the UK Ministry of Defence. Order intake over the year was 1.2x revenues, growing the order book out further; over 80% of next year’s consensus revenue forecast is now covered by the order book. The defence and security technology mini-conglomerate expects further demand strength next year as the conflict in Ukraine and tensions around Taiwan drive increased investment in defence.


On The Beach (-26%) weakened as interim results showed softer-than-expected trading in the six months to 31 March and flagged an uncertain second-half outlook. Although revenues rose 38% year-on-year to £73m, it recorded a loss before tax. Holiday booking volumes in its value segment have yet to recover to pre-pandemic levels due to the cost-of-living crisis. On The Beach invested heavily in the brand during the first half, a strategy which it hopes this will pay dividends during the second half of the year, which typically accounts for the majority of full-year volumes.


Tristel (+9.2%) moved higher without any obvious newsflow catalyst in May, although early in June it was subsequently announced that the US Food and Drug Administration has approved the classification of Tristel’s ULT product as a high level disinfectant. Tristel is well-placed to move quickly on the back of the announcement, with a key US manufacturing and distribution partner already in place in the form of Parker Labs, the market leader in the manufacture and sale of the gel used in ultrasound scans, a complementary product to Tristel’s disinfectant. The ULT high-level disinfectant complements Tristel’s existing DUO intermediate level disinfectant, allowing it to target the whole of the US ultrasound market, where around 215 million scans are carried out each year.


Shares in Zoo Digital Group (-23%) continued to soften after the April announcement of a placing and retail share offer to raise acquisition funds. The company is buying one of its partners in Japan, a media localisation subsidiary of a Japanese technology company. The Fund participated in the placing as it built out its position in Zoo Digital towards target size. The company provides subtitling, dubbing, and other media localisation services to the TV and movie industry. We believe it possesses strong intellectual property in the software tools it has developed, including Zoo Studio, a vendor order management system embedded within end clients. Furthermore, it has a global distribution network through an extensive freelancer base, and an increasing physical presence in key geographies.


K3 Business Technology left the Fund during May after its senior management equity ownership level fell below the 3% threshold required of all smaller companies in the Economic Advantage investment process. The fund managers believe that high senior manager equity ownership gives them ‘skin in the game’ and helps encourage good alignment of incentives between shareholders and company management. Another small portfolio change saw Quixant changed its name to Nexteq, to reflect the growth of its software and hardware solutions into industries outside of its initial core gaming market.


Positive contributors included:

Surgical Innovations Group (+15%), James Cropper (+13%), Cohort (+13%), Netcall (+12%) and Tristel (+9.2%).


Negative contributors included:

On The Beach (-26%), Zoo Digital Group (-23%), Eckoh (-22%), IG Design Group (-17%) and Intercede Group (-16%).


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


Past performance does not predict future returns








Liontrust UK Micro Cap

I Acc






FTSE Small Cap ex ITs






IA UK Smaller Companies













*Source: Financial Express, as at 30.04.23, total return (net of fees and income reinvested), bid-to-bid, institutional class.


**Source: Financial Express, as at 31.03.23, total return (net of fees and income reinvested), bid-to-bid, institutional class.

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.

The portfolio is primarily invested 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.


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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