The Liontrust GF UK Equity Fund returned 4.4% over the quarter, outperforming the 3.7% return from its comparator benchmark, the FTSE All Share Index, and the 3.8% average return from the IA UK All Companies sector, also a comparator benchmark.*
The UK market delivered a strong performance during the second quarter that was driven by large market constituents, including AstraZeneca, HSBC, Shell and Unilever. M&A interest in UK assets also featured strongly, with bids across the size spectrum for Anglo American (rejected), Hargreaves Lansdown, Darktrace, and Britvic. Market expectations have shifted over the quarter to assume fewer base rate cuts by the end of the year by the Bank of England, which held rates at the latest June meeting.
From a sector perspective, an underweight exposure to financials and an overweight in industrials contributed the most to returns. An overweight exposure to health care weighed the most.
Positive stock attribution
Not holding Diageo was the top positive contributor to performance in the quarter.
The second leading contributor was our overweight in AJ Bell. Its results beat expectations and guidance for the full year was raised.
Overweights in NatWest bank, Verisk Analytics and Auto Trader also contributed significantly to performance.
Negative stock attribution
An overweight in Spirax was the most significant detractor from performance. Its guidance was increasingly seen as tough to achieve.
An underweight in AstraZeneca was the second most significant detractor from performance. An investor day outlined above consensus revenue growth.
An underweight in HSBC and an overweight in Compass also weighed on performance.
Trading activity
We purchased a new position in Halma, the leading industrials business exposed to structural growth dynamics such as increasing demand for healthcare, climate change, and improving safety and efficiency. Halma has a high return and cash generative business model, reinvesting free cash flow into bolt-on M&A. Halma operates with a devolved structure, and has an excellent track record of execution.
We exited our position in Weir in the quarter owing to the risk/reward balance tilting negatively in comparison to other cyclicals.
Outlook
Following a historic win for the UK Labour Party in the recent UK General Election that gave it a sizeable majority, we anticipate a period of relative stability for the UK, both relative to recent history (fifth prime minister in five years) and relative to the US and Europe – in particular France – which are facing their own electoral challenges. While there is usually a gap of varying widths between what a political party promises in a manifesto and what it can deliver in government, the Labour victory should see a meaningful reduction in the political uncertainty risk premium that has been attached to UK assets for several years. As we enter this next period, we retain our focus on identifying businesses that can deliver whatever the economic and political weather. We select companies with strong or improving market positions and that possess the agility to adapt to likely uncertainty and volatility in the prevailing economic environment. Many world class businesses in the UK equity market are trading on highly attractive valuations, which we believe compensate for some of these external risks.
Discrete years' performance (%) to previous quarter-end:
|
Jun-24 |
Jun-23 |
Jun-22 |
Jun-21 |
Jun-20 |
Liontrust GF UK Equity Z Acc GBP |
14.5% |
12.4% |
-10.5% |
24.3% |
-11.4% |
FTSE All Share |
13.0% |
7.9% |
1.6% |
21.5% |
-13.0% |
IA UK All Companies |
11.0% |
6.4% |
-7.8% |
25.6% |
-12.5% |
Source: FE Analytics, as at 30.06.24, primary share class, total return, net of fees and income reinvested.
Key Features of the Liontrust GF UK Equity Fund
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.
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.
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 invest in emerging markets which carries a higher risk than investment in more developed countries. This may result in higher volatility and larger drops in the value of the fund over the short term. 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.