Liontrust UK Smaller Companies Fund

• Global equity markets rebounded amid signs of easing US-China trade tensions, including significant tariff cuts and a new US/UK trade agreement.
• Keystone Law Group and Animalcare move higher on strong 2024 results releases.
• Alpha Group the latest Fund holding to attract takeover interest.

The Liontrust UK Smaller Companies Fund returned 7.1%* in May. The FTSE Small Cap (excluding investment trusts) Index comparator benchmark was 7.8%, and the average fund in the IA UK Smaller Companies sector, also a comparator benchmark, returned 7.3%

Global equity markets continued their recovery from April’s sell-off on more signs of a de-escalation of the US trade war. Developments in May included the US and China slashing their reciprocal tariffs – from 145% to 30% on Chinese goods and from 125% to 10% on US goods – and the agreement of a US/UK trade deal.

In this more risk-on environment, the Fund benefited from a strong rebound in many of its small cap and AIM-listed holdings, with a number of these positions reporting double digit share price gains during the month. While these moves so far represent but a fractional reversal of the extreme de-rating across the smaller company segment of the portfolio over the past few years, it is nevertheless cheering to see significant signs of life emerging. We have consistently sought to emphasise that despite the brutal underperformance of mid and small caps since the end of 2021, relative to their large cap peers, the Fund remains resolute in its conviction that such companies retain their highly attractive growth compounding potential over the longer term. It has maintained its exposure so that our investors may benefit when the cycle finally turns again in favour of smaller companies.  

Having upgraded financial guidance in February, platform law firm Keystone Law Group (+19%) followed up with full-year results showing 11% revenue growth to £97.7 million in the year to 31 January, with pre-tax profits rising 13% to £12.7 million. The group also commented on a positive start to the new financial year, with good recruitment activity keeping it on track to meet expectations.

Animalcare (+19%) rallied through May having released 2024 financial results on 29^th April. The company reported on a strategically transformational year during which it disposed of its majority shareholding in UK-based pet microchipping company Identicare and reinvested the proceeds in Australia-based Randlab (a deal which completed just after year end). In an investor presentation in May, management made upbeat comments on current trading and prospects, noting that Randlab’s integration is progressing smoothly.

Interim results from AJ Bell (+17%) outlined strong growth momentum which has carried over to the start of the second half of its financial year. The investment platform provider now expects revenue and profits for the year to 31 March 2026 to exceed its prior guidance. AJ Bell added 51,000 customers in the first half of its year – 9% growth – while assets rose 5% to £90.4 billion. The group also saw investors react to significant market volatility by increasing trading activity.

Corporate foreign exchange specialist Alpha Group International (+16%) rose on confirmation of bid interest from US-based Corpay, with Alpha’s board of directors confirming it had rejected a preliminary cash proposal. However, on 30^th May Alpha Group stated it had subsequently had constructive talks with Corpay which led it to seek an extension (to 7^th July) for the Takeover Panel’s ‘put up or shut up’ deadline for a formal offer to emerge. S&P 500 constituent Corpay provides corporate expense payments systems.

Alpha Group was recently the focus of Victoria’s Stock Exchanges podcast, with founder and former CEO Martin Tilbrook reflecting on how he scaled a consultancy-led startup into a global platform.

FRP Advisory Group (-2.3%) commented that although trading in the first nine months of its year was strong, the final quarter’s volatility around trade tariffs saw a drop in business confidence and delays in decision making, with completion on several of its corporate finance projects delayed into the new financial year. As a result, revenues and profits for the year to 30 April 2025 will fall slightly short of market consensus.

Positive contributors included:

Judges Scientific (+34%), Keystone Law Group (+19%), Animalcare (+19%), AJ Bell (+17%) and Alpha Group International (+16%).

Negative contributors included:

Eagle Eye Solutions (-12%), Robert Walters (-8.4%), Netcall (-7.6%), Tribal Group (-5.5%) and FRP Advisory Group (-2.3%).

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

*Source: Financial Express, as at 30.05.25, 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, primary 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.