Where are you?
  • Austria
  • Belgium
  • Denmark
  • Finland
  • France
  • Germany
  • Guernsey
  • Ireland
  • Italy
  • Jersey
  • Luxembourg
  • Malta
  • Netherlands
  • Norway
  • Portugal
  • Spain
  • Singapore
  • Sweden
  • Switzerland
  • United Kingdom
  • Rest of World
It looks like you’re in
Not your location?
And finally, please confirm the following details
I’m {role} in {country} and I agree to comply with the terms of the website.
You are viewing as from Change

Liontrust GF SF Multi-Asset Global Fund

Q2 2024 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 -1.3% over the quarter, versus 1.8% from its comparator benchmark, a blend of 50% MSCI World, 35% Markit iBoxx EUR Overall and 15% ESTER*.

Global equities continued to be driven by the theme of rapid AI investment growth, particularly within the US, which accounts for around two thirds of the index and investable universe. Over the quarter, a narrative began to emerge that software investment, which is such a key driver of overall business efficiency improvements, was beginning to stall, as business owners preferred to focus on AI opportunities. This was primarily driven by some disappointing numbers from a number of large software bellwethers, with Salesforce’s quarterly numbers the catalyst. At the same time, Apple’s announcement that it was targeting on-device AI led to strong performance across AI and those connected to smartphones.

There was significant divergence in performance within the technology sector, with software names down, often in double digits. From a style perspective, these trends played further into the narrow performance leadership from mega-cap technology stocks. The sheer size of both the market cap of these companies, and the large movements higher in their share prices, has made keeping up with the index very challenging for active managers. Furthermore, weakness from mid and small cap stocks – where we retain an overweight – has been exacerbated by AI and adverse movements in the US 10-year treasury yield.

Within equities, underperformance for the quarter was driven by our exposure to software names, particularly related to our “more efficient” set of themes. While we do have exposure to some energy efficiency plays in AI and semi-conductors, performance has been driven by the mega caps, with Apple and Nvidia the key beneficiaries. Our industrials sector exposure also suffered, as names exposed to the US housing sector fell on the back of the Pool Corp’s underwhelming Q2 earnings release.

Higher bond yields in both the UK and the US were a headwind to our infrastructure portfolio, and the rate-sensitive nature of these long duration assets led to a fall in nine of the 11 names in the portfolio. The Canadian Solar Infrastructure Fund, Aquila Renewables and Asian Energy Impact Trust were the worst performers, all down more than 10%. The sector should benefit from falling long term rates, but the technical headwinds created by a lack of flows into natural buyers for these funds remains an issue. Consolidation and share buybacks are options being considered by management teams across this sector. 

Our corporate bond portfolio also fell over the quarter. Corporate credit fundamentals are robust, and global default rates remain low and are forecast to decline further. When combined with economic data that has remained resilient, this has resulted in corporate credit spreads tightening over the year. Relative returns in the corporate bond allocation has been strong, offsetting much of the drag stemming from yields trending higher over the first half of the year. However, much of the spread tightening occurred in the first quarter which resulted in returns and relative performance being more in line over the second quarter as corporate credit spreads were flat over this period. Banks and insurance bonds have been positive contributors throughout this period. 

Asset Allocation for the quarter was neutral. Overall, we moved to reduce the overweight infrastructure position, and reallocated this to increase the overweight in global equities. We remain overweight global equities, UK equities, credit and infrastructure, and fund this from underweight government bonds and cash.

We continue to believe in the quality of the companies held within our portfolios. In aggregate, they are performing well operationally and are on attractive valuations. This gives us confidence for the future outlook for our funds and investors.

Payroll provider Paylocity was the Fund’s most notable exposure to the investor rotation away from software names. Shares in the company had initially risen sharply having lifted its annual revenue outlook and posted stronger-than-expected quarterly results, but gave back ground over the quarter as the backdrop became less supportive. Held under our Enabling SMEs theme, Paylocity is a leading Human Capital Management (HCM) software provider. Its products enable its customers, which are primarily small businesses, to manage the increasingly complex demands of managing its employees.

Also among the detractors was Adyen, a pure-play payments platform which is held under our Enhancing digital security theme. Adyen’s shares slumped after a slowdown in the company’s net revenue growth (to 21% year-on-year in Q1) led total revenue of €438 million to fall short of analyst’s expectations. Adyen operates a global payments platform, integrating the full payments stack: gateway, risk management, processing, issuing, acquiring, and settlement. It takes a small charge on all transactions processed and has a single technology platform that is scalable, efficient and has minimal fraud rates. We strongly believe that any company whose revenues are generated from the safe shift away from cash to digital payments is one that provides net benefits to society.

IQVIA, the life sciences company, slid after cutting its revenue forecast range for the full year to $15.3 billion - $15.6 billion from $15.4 billion - $15.7 billion. Held under our Providing affordable healthcare theme, IQVIA is a leading global provider of advanced analytics, technology solutions and clinical research services to the life sciences industry. The company connects healthcare organisations and patients with data in an effective way to ensure faster decision making on healthcare outcomes.

Turning to the portfolio positives, Alphabet was the top performer after reporting Q1 revenue that exceeded analysts’ expectations, buoyed by growth in its cloud computing unit. Held under our Providing education theme, Google’s parent company generated sales, excluding partner payouts, of $67.6 billion for the three months ending March 31, surpassing the $66.1 billion expected on average. The company also said it would pay a dividend of 20 cents a share, its first ever, and repurchase an additional $70 billion in stock.

Spotify, the world’s dominant audio platform, also rose strongly after reporting a swing back to profit in the first quarter, as the company boosted subscribers and added new features. Held under our Encouraging sustainable leisure theme, Spotify announced that paid subscribers rose 14% year-over-year to 239 million, while total active users grew to 615 million.

While the company fits into our leisure theme, the environmental impacts of music consumption – now that this is virtually all digital – has reduced to the energy consumed by data centres and device use. This has dramatically lowered the environmental impact from physical records and discs, which have issues with energy intensive hydrocarbon derived plastics and pollution issues at end of disc life.

Microsoft, a position we added during the quarter, was another notable performer and a welcome outlier in the trend for software sector weakness. Its shares climbed after reporting better-than-expected quarterly sales and profit, lifted by corporate demand for the software maker’s cloud and artificial intelligence offerings. Revenue in the third quarter, which ended March 31, rose 17% to $61.9 billion, while profit was $2.94 a share – both ahead of consensus estimates.

Exposed to our Improving the resource efficiency of industrial and agricultural processes theme, Microsoft's software and services empowers businesses all over the world to be more efficient. Through its cloud offering it reduces the environmental costs of businesses to run compute power and storage, and through its cyber security products it protects businesses from being hacked. 

In terms of other trade activity, we initiated positions in ASM International, West Pharmaceuticals, Experian and ServiceNow. ASM International, the market leader in Atomic Layer Deposition (ALD) manufacturing tools for the semiconductor industry, was added under our Improving the efficiency of energy use theme. ALD is a critical process for customers to produce chips in a Gate-All -Around (GAA) architecture, which enables an improvement in energy efficiency of approximately 25%.

West Pharmaceuticals is a new holding under our Enabling innovation in healthcare theme, designing and producing high quality integrated containment and delivery systems for injectable drugs and healthcare products. Key customers include biologic, pharma, diagnostic and medtech companies. The focus here is on quality – excellence in manufacturing, scientific and technical expertise to ensure delivery of safe and efficacious drug products to patients. West's expertise and high quality standards facilitate the delivery of medicine to patients around the world and offers innovation and expertise to help maintain the quality and efficacy of very impactful drug types like biologics injectables and cell and gene therapies.

We added Experian, a market leading global information services company, under our Transparency in financial markets theme. It's business-to-business division helps lenders and borrowers access and distribute debt responsibly, by assisting to manage the risks of lending, identify and understand customers to predict and manage credit risk to make transactions safer. Its consumer services division helps individuals to access the financial services they need, and better understand their credit profile and financial position, supporting social and economic development and reducing financial exclusion.

Lastly, ServiceNow was added to our Improving the resource efficiency of industrial and agricultural processes theme. ServiceNow builds workflow tools for companies to automate previously manual tasks. This reduces waste and by freeing up employee time thus helping makes companies more efficient.

Adobe was sold. We are concerned that generative AI competition may begin to eat away at the virtual monopoly that Adobe enjoys in its creative cloud business. This follows the failed attempt to acquire competitor Figma, for which it offered an eye wateringly high multiple, suggesting some desperation by the management team. We see the Adobe investment thesis at risk on a five-year view.

We also sold Illumina, as the business moves to spin off the Grail business. We are concerned the core Illumina business is experiencing a step change in the elasticity of demand for its products. As it’s dropped the price of sequencing a single genome, customers are potentially using that to improve their own margins, rather than it leading to significant growth in the number of genomes they sequence. Competition has also increased, and Illumina’s dominance of the sequencing market has been attacked from China and across the world.

Finally, we also disposed of Equinix on concerns that practices it has related to overselling power may become a headwind as power demand related to AI grows exponentially. We were also concerned following the abrupt departure of the CEO, which we view as a risk to the investment thesis.

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

 

Jun-24

Jun-23

Liontrust GF Sustainable Future Multi Asset Global A5 Acc EUR

9.7%

4.0%

50% MSCI World, 35% Markit iBoxx EUR Overall, 15% ESTER

13.8%

5.9%

*Source: FE Analytics, as at 30.06.24, primary share class (A5), in euros, total return, net of fees and income & interest reinvested. 10 years of discrete data is not available due to the launch date of the fund.

Key Features of the Liontrust GF SF Global Growth Fund

The Fund aims to achieve capital growth over the long term (five years or more) through investment in sustainable securities, predominantly consisting of global equities. Typically at least 90% of the Fund will be invested in the shares of global companies, with up to 10% in bonds and cash. The Fund will only invest in companies that meet defined ethical considerations and will benefit from improvements in environmental standards and a shift towards a more sustainable economic system. While the Fund will invest predominantly in companies from developed markets it may also invest up to 20% in emerging market securities. In normal conditions, the Fund will aim to hold a diversified portfolio, although at times the Investment Adviser may decide to hold a more concentrated portfolio, and it is possible that a substantial portion of the Fund could be invested in cash or cash equivalents. The Fund is not expected to have any exposure to derivatives (contracts whose value is linked to the expected future price movements of an underlying asset) in normal circumstances but may on occasion use them for investment, efficient portfolio management and for hedging purposes including gaining exposure to financial indices.
5 years or more.
5 (Please refer to the Fund KIID for further detail on how this is calculated)

Active
The Fund is considered to be actively managed in reference to MSCI World (the "Benchmark") by virtue of the fact that it uses the Benchmark for performance comparison purposes. Some of the Fund's securities may be components of and may have similar weightings to the Benchmark. However the Benchmark is not used to define the portfolio composition of the Fund or as a performance target and the Fund may be wholly invested in securities which are not constituents of the Benchmark.
The Fund is a financial product subject to Article 9 of the Sustainable Finance Disclosure Regulation (SFDR). You can learn more about our implementation of the SFDR here.
Understand common financial words and terms See our glossary
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.

All investments will be expected to conform to our social and environmental criteria. Overseas investments may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of the Fund. The Fund may encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings. Outside of normal conditions, the Fund may hold higher levels of cash which may be deposited with several credit counterparties (e.g. international banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash. Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails.

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.

Commentaries Sustainable Fixed Income

Related commentaries

See all related
Mike Appleby Mike Appleby
The case for National Grid
icon 3 December 2024
Mike Appleby
Lionesses Simon Clements & Chris Foster
Finding sustainable investments in Japan
icon 3 December 2024
	Chris and Simon - Finding Sustainable investments in Japan
Mike Appleby Mike Appleby
The case for Alcon
icon 3 December 2024
Mike Appleby
Peter Michaelis Peter Michaelis
Overview of the Sustainable Future funds for Q3 2024
icon 3 December 2024
	Peter Michaelis - Overview of the Sustainable Future funds for Q3 2024
Ed Phelps, Trainee Sustainable Investment Associate Ed Phelps
The case for ASM International
icon 3 December 2024
	Ed Phelps - The case for ASM International
Peter Michaelis Peter Michaelis
The case for Wise
icon 3 December 2024
	Peter Michaelis - The case for Wise

Register your preferences and receive tailored communications from Liontrust