Liontrust Global Alpha Fund

• Global equity markets rebounded strongly in May reversing April’s tariff-driven declines and bringing year-to-date returns back into positive territory.

• Technology stocks led the rally globally while healthcare lagged due to regulatory concerns and company-specific issues; developed markets outperformed emerging markets as dollar weakness paused.

• Portfolio activity included adding to high-conviction positions, capitalizing on the improved tariff outlook and positive stock-specific T-score signals.

The Liontrust Global Alpha Fund returned 7.2%* in May, compared with the 4.7% return of the MSCI ACWI Index comparator benchmark and the 5.1% average return in the IA Global sector (also a comparator benchmark).

Market backdrop

US equity markets surged in May, with the S&P 500 up 6.2% in US dollar terms, the strongest monthly performance since November 2023 as markets continued to rebound from tariff-related April lows. This drove the Fund’s benchmark, the MSCI ACWI Index, to post a strong positive gain over the month. 

Whilst the rally was broad based, the technology sector led the rebound, rising 9.4%, followed closely by communication services (+7.2%) and industrials (+7.2%). In fact, the only sector to decline in May was healthcare (-4.4%), led lower by regulatory concerns and company-specific (UnitedHealth) challenges. 

Developed markets outperformed emerging markets in the period, a reversal of the prior three-month trend, possibly driven by a pause in dollar weakness which has been a key feature year to date. 

Central banks globally signalled a more dovish stance in the face of the tariff-related economic uncertainties with those in Europe (ECB), Sweden, Canada, New Zealand and UK reducing interest rates in May.

Portfolio review

The holding in Seagate (+28%) surged in the month, making it the strongest contributor to portfolio returns in May. Strong Q1 results and a successful analyst day led to significant upgrades to earnings forecasts which we believe still under-estimate the potential for increased HDD data storage demand. We retain our high conviction in the name.

April saw the US software sector post its strongest monthly performance vs. NASDAQ in 18 months and this momentum continued into May. Coupled with positive stock-specific earnings announcements, the holdings in Cloudflare (+36%), Snowflake (+28%) and Trimble (+14%) performed strongly, leading the attribution table over the month.

Rolls-Royce (+15%) and BAE Systems (+9.6%), which form part of our defence theme, continued to benefit from heightened geopolitical risks and the growing pressure on governments to increase defence budgets. In the UK, this was reinforced by the defence minister calling for stronger defence deterrents and increased budgetary expenditure. We see no reason for this multi-year trend towards increased defence spending to reverse and maintain our conviction in the portfolio holdings despite the strong share price moves to date.

On the other side of the attribution table, Elevance (-9.6%) and Sysmex (-10%) were dragged down by negative sentiment towards the healthcare sector which was beset by regulatory concerns and stock-specific issues (UnitedHealth profit warning), as well as yen strength negatively impacting Sysmex.

Portfolio Changes

The more positive newsflow surrounding tariffs led us to deploy some of our cash by adding to select positions, including SK Hynix and Seagate on improved earnings outlook and subsequent price target increases, and Cloudflare, Shopify and Snowflake on positive signals from our T-score indicators.

Outlook

Markets remain dominated by uncertainty. Economic growth seems to remain robust but the interplay with inflation concerns and resultant interest rate levels leaves us adopting a more balanced approach to our geographic and sector positioning.

We have carefully assessed the risks and where possible we have mitigated exposure to both the US market as a geography and to the IT sector. Markets are very clearly living their risk appetite through technology and high growth names and so remaining vigilant to the risks is the best way of maintaining alpha.

While risks do remain unclear at best, there is a resultant disparity between winners and losers that has widened and offers a deep pool of ideas for active, fundamental investors to consider and for this reason that we remain positive on the outlook for the Fund.

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. This Fund may have a concentrated portfolio, i.e. hold a limited number of investments or have significant sector or factor exposures. If one of these investments or sectors / factors fall in value this can have a greater impact on the Fund's value than if it held a larger number of investments across a more diversified portfolio. 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. The Fund will invest in smaller companies and may invest a small proportion (less than 10%) of the Fund in unlisted securities. There may be liquidity constraints in these securities from time to time, i.e. in certain circumstances, the 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 the fund to defer or suspend redemptions of its shares. 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. 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.