Liontrust UK Micro Cap Fund

• UK equity markets initially plunged following sweeping US tariffs dubbed "Liberation Day," but rebounded as investor sentiment improved after a softening in the US stance.
• Lower market capitalisation indices outperformed their larger peers.
• This revival in investor sentiment helped lift holdings such as Fonix, Tristel, Brickability, and Kitwave

The Liontrust UK Micro Cap Fund returned 4.2%* in April. The FTSE Small Cap (excluding investment trusts) Index and the FTSE AIM All-Share Index comparator benchmarks returned 1.9% and 1.5% respectively. The average return of funds in the IA UK Smaller Companies sector, also a comparator benchmark, was 1.9%.

UK equity markets initially endured a sharp sell-off after sweeping tariffs announced by US President Donald Trump – dubbed "Liberation Day" – sent shockwaves through global markets. However, sentiment improved later in the month following a shift in the U.S. administration's approach, including a 90-day delay on tariffs for non-retaliatory countries and the removal of duties on a range of electronic goods. This softening in tone provided reassurance to investors and supported a partial recovery in stock prices.

It was reassuring to see a broadening out of market performance beyond large caps as lower market capitalisation indices outperformed their larger peers during the market rebound, demonstrating stronger recovery momentum and capturing greater upside as market sentiment improved. The mid-cap FTSE 250 rose 2.7%, while the FTSE Small Cap ex Investment Companies Index gained 1.9%. In contrast, the more globally exposed large-cap FTSE 100 fell by 0.7%. This divergence – largely a reflection of risk aversion driven by macroeconomic uncertainty – continues to present an opportunity to invest in small caps at valuations near historic lows.

Several portfolio holdings saw strong share price gains despite a lack of company-specific developments, as they participated strongly in the recovery in investor sentiment after Trump rowed back on initial tariff threats.

Fund performance was helped by some strong share price recoveries during the month, particularly from the market lows near the start of the period. It was pleasing to see a degree of momentum return to many of the portfolio’s holdings and in fact since the market lows of 10^th April, 70% of the portfolio’s holdings delivered positive total returns and nearly a third delivered double digit returns for the remainder of the month.

Notable beneficiaries included Fonix (+23%), Tristel (+21%), Brickability (+21%), and Kitwave (+20%).

In terms of stock-specific newsflow, ActiveOps (+24%) reported strong financial performance for the fiscal year ending 31^st March, with a 13% increase in revenue and robust cash generation. The company achieved significant growth in new customer acquisitions, particularly in the US, Canada, Australia, and Africa, and launched new iterations of its Decision Intelligence software, which have been well-received by the market. 

Looking forward, while ActiveOps remains aware of current global economic challenges, it is optimistic due to the number of new customers currently being onboarded, the wide range of expansion opportunities within its existing client base, and the robustness of its sales pipeline.

There were no material detractors from Fund performance during the month.

A new position was initiated in accesso Technology Group, a leading provider of technology to the global leisure industry for customers like Disney and Merlin Entertainments. As a consequence of the recent market volatility the market capitalisation dipped below the Fund’s require threshold of £175 million presenting an attractive entry point for the Fund.

We believe several factors are aligning to create a more supportive environment for UK equities, particularly quality growth names in the small and mid-cap space. US President Donald Trump’s recent actions have triggered a reassessment of the relative appeal of US versus international markets, including the UK, while also raising the likelihood of faster interest rate cuts, which would benefit the asset class.

There is also growing momentum around potential government policy support. We’ve engaged extensively with both government and regulators on issues including AIM, pension reform, and the regulatory burden on listed companies, and have been encouraged by their willingness to strengthen the UK’s capital markets.

This combination of improving relative asset allocation dynamics and potential policy action underpins our increasing confidence that capital will begin to flow back into the market.

Positive contributors included:

ActiveOps (+24%), Fonix (+23%), Tristel (+21%), Kitwave (+20%) and Mercia Asset Management (+15%)

Negative contributors included:

BigBlu Broadband (-15%), Essensys Group (-18%), Gateley Holdings (-5.1%), Facilities by ADF (-17%) and Focusrite (-16%)

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

*Source: Financial Express, as at 30.04.25, total return (net of fees and income reinvested), bid-to-bid, institutional class. **Source: Financial Express, as at 31.03.25, total return (net of fees and income reinvested), bid-to-bid, institutional class. 

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 Funds managed by the Economic Advantage team:

• May invest in smaller companies and may invest a small proportion (less than 10%) in unlisted securities. There may be liquidity constraints in these securities from time to time, i.e. in certain circumstances, a fund may not be able to sell a position for full value or at all in the short term. This may affect performance and could cause a fund to defer or suspend redemptions of its shares. May invest in companies listed on the Alternative Investment Market (AIM) which is primarily for emerging or smaller companies. The rules are less demanding than those of the official List of the London Stock Exchange and therefore companies listed on AIM may carry a greater risk than a company with a full listing.
• 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.
• May invest in companies predominantly in a single country which maybe subject to greater political, social and economic risks which could result in greater volatility than investments in more broadly diversified funds.
• Outside of normal conditions, 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.

The risks detailed above are reflective of the full range of Funds managed by the Economic Advantage team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.

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.com 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.