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 Top contributors: CoreWeave, GE Vernova, Constellation Energy. Detractors: Doximity, Recursion Pharmaceuticals, Eli Lilly
• A more constructive market backdrop is shifting focus back to company fundamentals
• Continue to remain active to capture dislocation opportunities

Performance overview

The Liontrust GF Global Innovation Fund returned 10.2% in US dollar terms in May, compared with the 5.8% return of the MSCI All-Country World Index comparator benchmark.

Fund commentary

Following months of extreme volatility, May proved much more positive for equities. Key was a de-escalation in trade tensions between the US and China, with Washington and Beijing agreeing to slash reciprocal tariff rates – from 145% to 30% and 125% to 10% for the US and China respectively for 90 days as talks continue. While talks are ongoing and trade relations remain dynamic, this removed – or at least significantly reduced – the single-biggest macro overhang.

This improved macro sentiment allowed investor focus to shift back to company fundamentals, with markets rallying throughout the month as companies continued to report throughout the Q1 earnings season. Indeed, the MSCI World Index rose nearly 6% (in dollar terms) in May, finishing the month up over 4% year-to-date – a swift recovery given the index was down 12% year-to-date in early April.

During sharp market sell‐offs or resets, the best‐performing stocks from the preceding period often suffer the steepest declines – a phenomenon we witnessed in recent months, with a number of innovative global leaders selling down sharply in March and April. However, as we have discussed in the past, the reason for these companies’ outperformance was because their fundamentals continued to run ahead of their share prices. This continues to be the case, now to an even wider degree as evidenced by persistently strong earnings updates. As such, we have remained highly active in the portfolio over the past few months, initiating or adding to positions in companies hardest hit to take advantage of this dislocation opportunity.

This approach was validated in May. With broader market sentiment improving, these same companies have been among the first to see their share prices recover, driving strong performance across the fund. For example, shares in GE Vernova – a top contributor to fund performance for the month – finished May up 24%, having recovered over 70% from it’s early-April low. Similarly Constellation Energy, another top contributor performance, saw its shares rally 37% by month-end, up nearly 80% from its early-April low. Both company’s shares are up year-to-date.

While uncertainties remain over the ultimate path of trade policies, tariff-related inflation, and long-term treasury yields, we remain confident in the earnings power of our global innovators going forward – supported by secular growth dynamics, expanding moats, and improving fundamentals.

Strong fundamentals

With Q1 earnings season well underway, evidence of improving fundamentals was on full display throughout May.

Constellation Energy provided another strong update during the month, delivering Q1 earnings per share (EPS) of $2.14, reaffirming full-year guidance of $8.90–$9.60, and reiterating its 13% target for average annual EPS growth through to 2030. We first invested in Constellation in early 2024 on the thesis that large-scale nuclear utilities would re-rate as demand for stable power generation becomes invaluable in the AI age. A year on, the opportunity looks even more compelling. Constellation owns the largest nuclear fleet in the US, 21 gigawatts (GW) across 23 reactors, roughly 2.5× the capacity of the next biggest operator, and supplying c.22% of all US nuclear power. That installed base is not only irreplaceable but increasingly sought after: hyperscale data centres are shifting from price to uptime, and clean baseload capacity is now mission-critical infrastructure. Upgrades are being driven by rising clean energy premiums, accelerating demand from AI workloads, and structural tailwinds from policy. The nuclear production tax credit provides downside protection and an inflation-linked floor, while the recently announced Calpine acquisition brings 26 GW of complementary natural gas assets with flexible load-balancing capability.

Critically, Constellation's AI strategy is not theoretical. The business is already signing large-scale, long-term contracts with data centre operators – notably including Microsoft, and more recently Meta – to provide clean, reliable power with fixed-price certainty over 20+ years. While volatility remains, due to long-dated cash flows and macro sentiment, the investment case is clear: Constellation is building the foundational grid layer for AI. In a world of constrained supply, regulatory bottlenecks, and rising demand, nuclear incumbency is a structural moat. This is no longer a defensive utility. It’s a next-generation compounder, well positioned to continue its strong double digit % earnings and dividend growth trajectory in the years ahead.

Elsewhere, Shopify once again delivered an outstanding set of results, underlining that Amazon no longer has an exclusive right to dominate e-commerce in the current technology cycle. Amazon has become a behemoth with a sizeable underbelly, and it can no longer credibly claim to be agile or execution focused. As artificial intelligence democratises industries, e-commerce is set for significant change and remains a vast market to pursue. While selling the “picks and shovels” of the AI data-centre gold-rush has paid off handsomely over the past two years, Shopify fulfils a comparable role for bricks-and-mortar businesses, start-ups and emerging brands: helping them digitise and reach the e-commerce market. By integrating tools from the likes of Klaviyo, Meta and AppLovin, these firms can now compete with entrenched brand giants such as Lululemon, Gillette, Dove and Zara. 

Shopify provides the digital backbone without prohibitive costs, enabling businesses to reach customers in every nook and cranny of the globe. Management’s relentless focus on customer value continues to create momentum. Crucially, the company is now generating so much online value that it is targeting clients’ offline operations as well: last quarter it recorded robust growth in offline GMV, while its B2B segment delivered another triple-digit increase. Another key growth pillar is the stand-alone Shopify app, which posted 94% year-on-year GMV growth – significant given that it competes head-on with Amazon’s app. This performance reflects Shopify’s executional discipline and its serious embrace of AI, which is becoming second nature across the workforce. The company is investing heavily in model context protocol servers to make its data more accessible and easier to integrate into new applications. It is increasingly apparent that legacy retailers will struggle in this environment as digital-first companies – like Shopify – wield AI to innovate more rapidly and expand into adjacent areas such as offline retail. A unified software platform accelerates innovation and business momentum while simultaneously making it harder for competitors to keep pace.

Winning with customers: Shopify merchants benefit from platform innovation over time

Source: Shopify (2025)

Lemonade’s results showcased the benefits of building a platform for AI from the outset: the insurance company saw its topline surge by two thirds, whilst holding fixed costs flat. This is AI hard at work and puts credence behind management’s ambition to grow company revenues 10x without a corresponding rise in costs. Indeed, it was after meeting the CFO in New York in March and grilling him on this vision that we initiated a position in Lemonade in the fund.

From day one, Lemonade was conceived as a tech-driven insurer with AI at its core, automating all key processes – from customer onboarding (conversational AI quoting) to claims processing (pays claims instantly). We are seeing now the company’s proprietary data loop being turbocharged as the platform scales: Lemonade’s full-stack model means it owns all the data from every customer interaction, quote, and claim. This enables the company to leverage telematics data, behavioural economics data, and AI-driven lifetime value predictions to constantly refine its underwriting; choosing the best target customer profiles and offering them the most competitive rates. This dynamic learning loop improves loss ratios (which have collapsed from the high 80s to low 70s range today) and is hard for competitors to replicate without similar data breadth and AI infrastructure.

Furthermore, by infusing AI throughout the platform Lemonade offers a differentiated customer experience – instant quotes, rapid claims payouts, and 24/7 bot-based service. During the Q1 Californian wildfires, this meant many claims were paid within minutes, even up to policy limits. This customer value creation is feeding through to financials: Q1 revenues grew 27%, management raised its full-year guide and re-iterated its goal of adjusted EBITDA break-even by the end of next year. The platform is hitting escape velocity: although shares were duly rewarded with a c10% bounce on reporting, the company trades on a c4x price/sales ratio, well below peers growing at half the rate. 

We remain active

During periods of macro-driven volatility, we strategically increase our positions in the hardest-hit investments across the fund. Accordingly, over the past couple of months we have been highly active in raising our positions in companies across various sectors where upside opportunity has best emerged. While markets generally improved in May, we continued to see pockets of opportunity to top up positions where share prices dislocated from underlying fundamentals.

For example, Eli Lilly’s shares fell by c.10% on the day it reported results, so we took the opportunity to top up our position. The numbers were undeniably strong, with revenue up 45% and EPS up 29% year-on-year, both beating estimates. Management did, however, trim full year EPS guidance because of a one off charge related to the acquisition of an oral cancer programme from Scorpion Therapeutics. On the same day, CVS announced an exclusive agreement with competitor Novo Nordisk (also held).  Neither development alters our investment thesis. Today, GLP-1 penetration in obesity stands at <1%, even though roughly two thirds of US adults are overweight or obese. The total addressable market for GLP-1s for weight loss is expected to approach US $100 billion by 2030. Over the past year Lilly has taken share and driven most of the category’s growth; losing a single distribution channel is therefore unlikely to dent momentum while the overall market is expanding so rapidly. In addition, Lilly’s direct self-pay vial strategy is gaining traction – already responsible for c25% of new US prescriptions – which sidesteps restrictive formularies and preserves margins.

Looking forward, we believe Lilly’s oral GLP 1 portfolio will be the real game changer. Orforglipron, the company’s once daily pill, delivered very positive Phase III data in type 2 diabetes, and a raft of late stage trials is under way across indications ranging from obesity to sleep apnoea. Pipeline catalysts are plentiful in 2025, and no competitor has yet matched Lilly’s weight loss efficacy in an oral format. Pills not only eliminate needle aversion; they are easier to manufacture and require no cold chain logistics, further lowering Lilly’s cost base. With improving fundamentals and structurally-underpinned earnings growth prospects, we continue to see Lilly as a truly innovative global healthcare leader, well positioned to drive strong returns ahead.

We also continued to establish new positions in companies that have long been on our watchlist, and which we have been patiently awaiting suitable market dislocation to initiate positions. In May this included building new positions in FICO, Doximity, and CoreWeave.

We initiated a position in FICO mid-month after shares fell by over 30% post-earnings – its lowest point in two years, providing an attractive entry point in this high-quality global innovator which has compounded earnings at an above-20% annualised rate over the past decade. Best known for its crown-jewel FICO Score – the industry-standard measure of consumer credit risk in the USA – FICO is a global leading data analytics company, developing software and tools that help organisations across sectors to make better decisions, manage risk, fight fraud, optimise operations, and comply with regulations. Its solutions leverage big data, AI/ML, and cloud computing, and extend across a range of sectors including financial services, insurance, healthcare, retail, and more. The company’s May update appeared strong, beating consensus expectations as revenue grew 15%, operating margins expanded 5%, and EPS grew 27% year-on-year.

However, shares sold off due to the combination of muted software growth, acknowledged macroeconomic uncertainty (which could delay deal closures and slow usage-based revenue), and regulatory scrutiny over the company’s dominant 90% B2B credit scoring market share which may slow pricing growth. Whilst this creates a degree of overhang, the company’s recent FICO World event showcased continued strong innovation in the software space, with a number of new products with strong commercial potential as the company increasingly commercialises its considerable internal AI knowledge base. With management reiterating full-year guide for 15% revenue and 20% EPS growth and launching a $1 billion buyback program, we remain confident in FICO’s durable competitive advantages and long-term growth trajectory. 

The LinkedIn for healthcare professionals, Doximity operates the largest professional network and telehealth platform for healthcare professionals in the US, with over 80% of US doctors and 50% of nurse practitioners and physician assistants as verified members. Its platform provides digital tools for clinicians including secure HIPAA-compliant messaging, telehealth, electronic faxing, scheduling, and AI-powered workflow solutions; the company monetises this by leveraging its vast data and AI capabilities to offer highly targeted pharmaceutical advertising and medical hiring solutions, as well as subscription-based services for certain digital tools. We initiated a position early in the month, shares down c.30% from their February High despite strong underlying business momentum, which was evident in a robust Q4 earnings update in mid-May. The company saw record engagement, 17% revenue growth, and EPS of $0.38 – up over 50% year-on-year, beating expectations by over 40%. However, a marginally soft FY26 guide saw shares fall post-update, leading the stock to be a key detractor to fund performance for the month. Management appear to be taking a conservative approach, however, factoring in a macro-related spend growth deceleration despite seeing no impact in their business today. With sticky network effects, c.90% gross margins, and a highly scalable platform the company remains well positioned to generate strong cash flows and earnings growth as it scales in the coming years.

Conversely, our newly initiated position in CoreWeave proved an astute addition, the company emerging as top contributor to fund performance for the month. CoreWeave is a next-gen cloud provider purpose-built for generative AI, delivering high-performance, GPU-accelerated infrastructure that meets the growing demand for specialised compute. Unlike legacy cloud vendors, CoreWeave has architected its platform from the ground up for AI workloads - offering low-latency, elastic compute capacity at a lower cost. The company originally pivoted from crypto mining and moved early to secure access to cutting-edge GPUs, establishing a deep relationship with Nvidia and emerging as a preferred partner for emerging AI leaders including OpenAI and Mistral. As evidenced in its inaugural earnings update post-IPO, this strategy is clearly working: Q1 revenues of $982 million were up a whopping 420% year-on-year, while adjusted operating income of $163 million grew by 550% – both well ahead of consensus. Forward prospects remain strong as demand for inference and fine-tuning workloads accelerate, the company securing multiple new enterprise and hyperscaler clients while growing its revenue backlog to $25.9 billion (up 63% year-on-year) driven by major long-term contracts including a five-year, $11.9 billion deal with OpenAI. The company also completed the acquisition of developer platform Weights & Biases, adding 1,400 top AI labs and enterprises to its client base. Management is investing aggressively to serve this ramping demand, with $20+ billion of CAPEX guided for the full year to expand its footprint. The first company to deploy Nvidia GB200 Grace Blackwell systems at scale for leading AI developers, CoreWeave continues to capitalise on its deep relationships, first-mover advantage in AI-dedicated infrastructure, differentiated architecture, and highly flexible deployment model to take share from incumbents as AI demand ramps. With full year revenues guided to $5 billion, management expect operating leverage to emerge as they scale, adjusted operating margins forecast to reach 27-28% by 2027 – up from c17% today. Given an accelerating topline underpinned by AI scaling laws, strong competitive positioning, and margins expanding, CoreWeave appears incredibly well positioned for ramping earnings growth ahead.

To finance these purchases, we reduced a number holdings of which have performed well, and exited certain companies whose upside potential is no longer sufficient. In May this included trimming recent strong performers such as Constellation Energy and GE Vernova – companies we had topped up on share price weakness in prior months, now trimming to reallocate capital to better upside opportunities as shares through May. We also opted to exit our position in Nucor and Beam Therapeutics as we saw better opportunities emerge on our watchlist. These companies move back to the watchlist where we will continue to monitor them for potential attractive entry points in the future.

Innovators remain well positioned for a new cycle

Supported by insights from recent team research trips to the US and Japan, we remain buoyed about the long-term growth prospects for innovative global leaders in the fund, which remain well positioned for multiple new innovation waves across different sectors. This has been reinforced by another strong earnings season, where we have seen evidence of innovative companies proving their resilience and adaptability while strengthening their competitive positioning against a difficult market backdrop.

While a degree of macroeconomic and regulatory uncertainty persists, we are reassured to see that fundamentals – rather than sentiment – is starting to be rewarded in the market.

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

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.