Liontrust GF Global Innovation Fund

The Liontrust GF Global Innovation Fund continues to invest in innovative companies on the right side of AI, buying at cyclically depressed prices ahead of a new innovation cycle.

• March rounded a quarter characterised by a renewed bout of volatility, spurred by uncertainty over tariffs and their impact on business activity. This market dislocation presented an opportunity to strategically increase our holdings in the hardest‐hit investments across our portfolios.
• Fundamentals remain strong; an exceptional Q1 earnings season for global innovators was possibly the best experienced in over two years.
• Our quarterly research trip – with 40 management team meeting and over 100 transcripts reviewed – has increased our confidence in the outlook for innovators across various sectors, with the ability to strengthen their competitive positioning against a difficult market backdrop.

Performance overview

The Liontrust GF Global Innovation Fund returned -11.3% in US dollar terms in March, compared with the -4.0% return of the MSCI All-Country World Index comparator benchmark.

This rounded out the first quarter of 2025 where the fund returned -8.2%, behind MSCI All-Country World Index return of -1.3%.

Fund commentary

In the short term, market sentiment often drives share prices; however, over the longer term it is underlying fundamentals that determine investor returns. March rounded a quarter characterised by a renewed bout of volatility, spurred by uncertainty over tariffs and their impact on business activity. This new market cycle is now nearly two years old, characterised by both high returns and pronounced volatility. We believe now presents an opportunity for investors who have thus far remained on the sidelines, for three key reasons:

1. Strong fundamentals

We recently concluded an exceptional Q1 earnings season for global innovators – quite possibly the best we have experienced in over two years. These companies are generating strong momentum in the new market cycle as they capture market share or enter new markets. Just as in every prior cycle, the new winners this time around will differ from the past cycle. As in July 2024, when we experienced the last major severe market downturn, we are fortunate that this has occurred during a time when we are inundated with information from our companies and can underwrite our conviction in our holdings.

During sharp market sell‐offs or resets, the best‐performing stocks from the preceding period often suffer the steepest declines. This has indeed been the case: holdings across the Fund — including Constellation Energy, Broadcom, Nvidia, and GE Vernova — have experienced pronounced drawdowns. Nevertheless, these companies' outperformance was because their fundamentals continued to run ahead of their share prices; that is now the case to an even wider degree. As such, they are likely to be among the first to see their share prices recover.

For example, Broadcom continues to demonstrate strong progress despite recent share price weakness, the stock a key detractor in both March and the quarter as it sold off amid broader market uncertainty and concerns about AI infrastructure spending following the release of Deepseek’s more efficient AI model. As we have written previously, we believe these concerns are both overstated and misdirected: the collapsing cost of intelligence is by no means a new phenomenon and is crucial in facilitating the widespread adoption of AI across the economy.

Moreover, breakthroughs in reasoning and the emergence of new scaling laws – post-training scaling and inference-time scaling – continue to support a strong long-term demand outlook for AI infrastructure, as reflected in the significant multi-year data centre roadmaps from hyperscalers and sovereigns alike. In this context, Broadcom – alongside Nvidia – has been a key beneficiary, and remains exceptionally well positioned. The company delivered extraordinary AI-driven growth throughout 2024, with AI-related revenues surging 220% year-on-year to $12.2 billion. Key AI connectivity products such as Tomahawk and Jericho quadrupled their revenues, and AI XPU shipments to key hyperscaler customers Alphabet, Meta, and ByteDance doubled.

Looking ahead, management expects this momentum to accelerate further, capitalising on their first-mover advantage in transitioning to next-generation XPUs built on 3-nanometre nodes. In its last update, CEO Hock Tan emphasised the exponential increase in networking requirements as hyperscalers expand to clusters approaching 1 million XPUs - a substantial growth driver uniquely suited to Broadcom's expertise. With a serviceable addressable market projected at $60-90 billion by 2027 for just its major ASIC customers alone, Broadcom remains well positioned to capture value from this surging AI infrastructure demand. Recent share price weakness thus presented as an attractive top-up opportunity, underpinned by the company’s ongoing innovation, earnings growth prospects, and a strong track record of shareholder returns.

GE Vernova, meanwhile, remains at the forefront of a new era in electricity demand, driven by the soaring power requirements of AI and data centres. After two decades of stagnant global electricity usage, consumption is now inflecting sharply upwards, revealing the inadequacy of today’s power generation and grid infrastructure. GE Vernova is uniquely positioned on both sides of this transformation: its installed base already generates around 30% of the world’s electricity, supported by global leadership in high-efficiency gas turbines – with an installed base twice the size of its nearest peer – and dominance in US onshore wind. At the same time, its fast-growing electrification software business is modernising grid infrastructure, helping reduce outages by 18% and cut restoration times by 40% – vital as more critical workloads migrate to energy-intensive environments. Following a strong Q4 marked by record orders of $13.2 billion and improving profitability, the company enters 2025 with a $126 billion backlog and clear momentum across both power and grid. Gas turbine production is ramping, high-margin service opportunities are expanding, and recent wins – such as its contract for the world’s first carbon-capture-equipped gas plant – underscore its growing global relevance and support strong earnings growth ahead.

Constellation Energy also continues to demonstrate accelerating fundamentals, delivering a strongearnings beat earlier in the quarter with earnings per share, up 38% thanks to strong operational performance and effective cost management across its industry leading nuclear fleet. As the most reliable form of energy, nuclear will be essential to meeting the surge in electricity demand from AI data centres, which is forecast to rise fifteen-fold by the end of the decade. With the largest nuclear fleet in the US and best-in-class capacity factors, Constellation is well positioned at the forefront of this structural trend. Further, its recent acquisition of Calpine meaningfully expands its strategy and long-term growth profile, increasing total generation capacity to 60GW and making it the leading provider of carbon-free power in the US. The deal diversifies the portfolio beyond nuclear, adding substantial natural gas, geothermal and renewable assets, and enhances Constellation’s ability to serve large commercial customers across a broader geographic footprint, including increased exposure to the high-growth Texas market. Crucially, the gas assets complement the intermittency of renewables, providing the reliable, dispatchable energy supply valued by hyperscalers and data centres. Financially, the acquisition appears astutely executed—immediately accretive to both earnings and free cash flow—while a recent regulatory shift in favour of data-centre co-location further supports Constellation’s strong long-term outlook.

 2. Dislocation presents opportunity

We recently returned from our quarterly US research trip, having met with 40 management teams and reviewed over 100 transcripts. The message is clear: our portfolio companies remain well‐positioned to capitalise on multiple innovation cycles across a range of sectors.

In periods of market volatility prompted by macroeconomic factors, we strategically increase our holdings in the hardest‐hit investments across our portfolios. Accordingly, in March we raised our positions in companies across different sectors including Nvidia, Broadcom, GE Vernova, and Vertiv – the global leader in next-generation liquid cooling for AI datacentres. Although these stocks had fallen between 15% and 25% from their earlier Q1 peaks, their fundamentals are in fact accelerating. Notably, we have just experienced a highly positive earnings season, highlighting that recent market capitulation – both at the overall market level and within the technology sector – has been driven by sentiment rather than fundamentals.

We have also been establishing new positions across the Fund in companies that have long been on our watchlist, and where we have awaited a suitable market dislocation to initiate positions. For example, in March we initiated a new position in Lemonade – an AI-native insurance company we met with during our recent US research trip. Lemonade is a prime example of how next-generation financial services firms are harnessing proprietary data and automation to build fundamentally new business models. Operating with minimal headcount growth, Lemonade continues to scale rapidly by leveraging AI to drive customer acquisition, claims processing, and personalised user interactions. This not only creates an excellent customer experience but also allows the company to maintain a relatively fixed cost base as it grows, enabling strong operating leverage. The result is clear evidence of improving unit economics: in-force premium has steadily risen while core operating expenses have remained flat.

We see this AI-driven scalability as a powerful differentiator, particularly in an industry long constrained by traditional cost structures. As financial services undergo their own AI transformation – much like the one already seen in consumer tech – we believe Lemonade is well positioned to be a long-term winner. With rising customer retention, increasing embeddedness, and a growing product portfolio, the company is building the kind of early-mover advantage that has historically translated into strong value creation across digital platforms.

Lemonade’s ramping AI-driven efficiency

Source: Lemonade (2025)

To finance these purchases, we have reduced a number holdings of which have performed well, such as Chinese stocks, healthcare stocks, and select others, and also exited certain companies whose upside potential is no longer sufficient. In March this included trimming recent strong performers such as L’Oreal, Pinduoduo, and Beam Therapeutics, while we opted to exit our positions in Anta Sports Products and Uber after they achieved our price targets. We also exited MongoDB – a company that remains well positioned to provide the data infrastructure for the AI era but which we moved back to the watchlist as we saw more compelling upside opportunities emerging elsewhere.

3. Innovators remain well positioned for a new cycle

Following our research trip, we have increased confidence in the outlook for innovators across various sectors. These companies remain well‐positioned to benefit from the significant opportunities ahead. As sentiment, rather than fundamentals, has primarily driven this recent sell‐off, it has created an attractive entry point for those seeking to establish or expand positions.

April has started with further volatility following the US government’s ‘Liberation Day’ event, with markets digesting the impact of new wide-spread tariffs from the Trump administration. While the breadth and scale of these tariffs appear significant, at this stage we are still waiting on further information from both the Trump team and other governing bodies around the globe.

During such protracted periods of uncertainty, it is critical to remain focused on the business fundamentals which underpin longer-term growth potential. We look to the upcoming earnings season and further research trips in the quarter ahead where we expect to see further evidence of innovative companies proving their resilience and adaptability, strengthening their competitive positioning against a difficult market backdrop. As always, we will continue to maintain our valuation discipline, taking advantage of further market dislocations to invest in innovative companies at attractive prices.

Key Features of the Liontrust GF Global Innovation Fund

Notes:  ¹As specified in the PRIIP KID of the fund; ²SRI = Summary Risk Indicator. Please refer to the PRIIP KID for further detail on how this is calculated.

KEY RISKS

Past performance does not predict future returns. You may get back less than you originally invested.

We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.

• The Fund invests in global equities. The Fund may also invest in other eligible asset classes as detailed within the prospectus.
• The Fund considers environmental, social and governance ("ESG") characteristics of companies.
• The Fund is categorised 6 primarily for its exposure to global equities.
• The SRRI may not fully take into account the following risks:
  - that a company may fail thus reducing its value within the Fund;
  - 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 in certain circumstances, invest in derivatives but it is not intended that their use will materially affect volatility. Derivatives are used to protect against currencies, credit and interest rate moves or for investment purposes. The use of derivatives may create leverage or gearing resulting in potentially greater volatility or fluctuations in the net asset value of the Fund. 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.
• Credit Counterparty Risk: 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.
• Liquidity Risk: 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.
• ESG Risk: there may be limitations to the availability, completeness or accuracy of ESG information from third-party providers, or inconsistencies in the consideration of ESG factors across different third party data providers, given the evolving nature of ESG.
• Growth stocks tend to pay out lower levels of dividend resulting in lower income yields and may produce more volatile returns than the market as a whole.

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.

DISCLAIMER

This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.

It 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.

This information and analysis 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, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.

This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, 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. 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.