Liontrust UK Ethical Fund

The Fund returned -2.6% over the quarter, versus the IA UK All Companies sector average of -0.7% and the MSCI UK Index’s -0.6% (both of which are comparator benchmarks)*.

Across the portfolios, we continue to concentrate on where we have expertise and confidence in our predictions, namely the 20 sustainable themes that identify companies set to benefit making our world cleaner, healthier and safer. We continue to manage our portfolios in alignment with the themes, which themselves sit within three broader categories of Better resource efficiency, Improved health and Greater safety and resilience.

Within Better resource efficiency, the growth of renewables is accelerating for a market that's estimated to be worth half a trillion dollars, while the advent of the war in Ukraine has shown how security of supply is another essential attribute of renewable energy.

Under Improved health, there has been dramatic innovation in the development of diagnostic tools to aid early diagnosis, cancer and other diseases through the advances that we've seen in gene sequencing. Finally, within Greater safety and resilience, with water quality making the headlines, our theme around better monitoring of supply chains and quality control is focused on companies which provide equipment and services that undertake the essential analysis of our water, air and food.

All these areas are important to solving key sustainability challenges and should also deliver growth that is relatively independent of overall economic growth. While 2022 was a tumultuous year for almost every asset class, we believe that the foundations for our key themes – Better resource efficiency; Improved health; and Greater safety and resilience – are stronger than ever.

Online money transfer specialist Wise performed strongly over the quarter after more than tripling its annual profits, boosted by an increase in customer numbers, while higher interest rates lifted income. The fintech company also updated its outlook for its 2024 financial year: it now expects income to grow between 28% - 32%.

Held under our Increasing financial resilience theme, Wise's mission is to bring transparency and fairness into moving money around the world. This covers pricing of products and sharing the economies of scale in order to bring foreign exchange (FX) costs down to zero. Traditionally, FX has been very costly for individuals especially those remitting small amounts regularly. Wise offers a significantly better rate, lower fees, and very simple app-based approach. Offering better rates is not just about having more to spend on your holiday; for migrant labour the typical 6% charge to remit earnings has very real impacts on household spending. Wise can reduce this by 60% on average.

Global catering services provider Compass Group was also among the positive contributors, reporting first-half results that topped estimates, increasing its outlook for the year and announcing a generous £750m share buyback plan. Exposed to our Leading ESG management theme, Compass serves 5.5 billion meals a year and employs 600,000 people across 55,000 client locations. The company fits into our investment universe for the way it manages its key Environmental, Social and Governance issues, which we believe are best in class and lead to superior growth and margin progression over the long run.

Having released full-year results that disappointed investors in April, Learning Technologies Group continued its downward trajectory through the quarter. The company experienced another share price slide after issuing an AGM notice in June stating that it continues to see ‘moderate business momentum’ in a challenging macro-economic environment.

While investor newsflow was relatively light over the quarter, Mortgage Advice Bureau (MAB) was among the detractors as the UK continues to grapple with stubbornly high inflation and a flatlining economy. Exposed to our Saving for the future theme, MAB provides a platform for mortgage advisers to help individuals get mortgages and insurance products. These products provide clear benefits to society and Mortgage Advice Bureau is instrumental in professionalising the industry.

Identity verification and fraud protection specialist GB Group reported an increase in revenue for the year to 31 March, rising to £279m from £244m the previous year. However, the group posted a £119m pre-tax loss after recording a £122m impairment charge as it factored in lower demand trends for its US identity business. GB Group, which is exposed to our Enhancing digital security theme, helps reduce the incidence of fraud and enables other companies to meet compliance regulations. Its products directly contribute to making the digital world safer and more resilient. The proposition to customers is to root out fraud while not deterring genuine customers. It claims their products can verify 50% of the global population in 70 countries.

With regard to portfolio activity, we added global information services company Experian under our Increasing financial resilience theme. As the world’s largest consumer credit bureau, Experian plays a critical role financial stability through the provision of transparent and accurate credit information. Experian has also developed a number of free tools on the consumer side of the business aimed at improving financial inclusion and credit scores – Experian Boost and Experian Go – helping people establish a credit identity and improve their score, all free of charge.

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

Past performance does not predict future returns

*Source: FE Analytics, as at 30.06.23, total return, net of fees and income reinvested.

**Source: FE Analytics, as at 30.06.23, primary share class, total return, net of fees and income reinvested.

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 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.

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.