Liontrust GF Global Innovation Fund

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

• Q2 Top contributors: GE Vernova, CoreWeave, Broadcom. Detractors: Sweetgreen, Meituan, Novo Nordisk
• Highly volatile quarter reiterates importance remaining focused on company fundamentals, which continue to accelerate for innovative companies well positioned for the new cycle
• Remain highly active, capitalising on attractive valuation opportunities to invest in innovative companies trading at attractive discounts

Performance overview

The Liontrust GF Global Innovation Fund returned 9.4% in US dollar terms in June, compared with the 4.5% return of the MSCI All-Country World Index comparator benchmark.

This rounded out the second quarter of 2025 where the Fund returned 29.5%, compared with the MSCI All Country World Index return of 11.5%.

Fund commentary

The past few months have proved a strong reminder that in the short term, market sentiment often drives share prices, but over the longer term it is underlying fundamentals that determine investor returns.

We are now around two years into this new market cycle, characterised by both high returns and pronounced volatility. This was evident in the second quarter of 2025, with the VIX volatility index spiking to levels not seen since the GFC following April's "Liberation Day" trade policy announcements from the US which sent reverberations around global markets. Heightened uncertainty around tariffs and their potential impact on inflation and trade activity weighed on investor sentiment, the MSCI World index to falling over 9% in early April – the 5th worst sell-off we have seen in the past 75 years.

During such sharp market sell-offs or resets, the best-performing stocks from the preceding period often suffer the steepest declines – a phenomenon we witnessed acutely in April, with a number of innovative global companies which had led markets over prior periods selling down strongly.

Importantly, we continued to see evidence of strengthening underlying fundamentals from these companies throughout this period, as evidenced in consistently strong earnings updates and positive progress witnessed first-hand during our quarterly research trips. We are increasingly confident that the winners of this cycle will be different to those of the past, with new companies emerging against this volatile backdrop to position themselves on the right side of multiple innovation cycles across sectors in the years ahead.

As we noted back in April, this stark dislocation between share prices and strengthening fundamentals thus provided attractive opportunities for active managers, and we capitalised on our strict valuation discipline and active approach to reposition the portfolio during this period, including topping up companies hardest hit and adding new positions in companies which had long been on our watchlist but whose share prices had yet to provide satisfactory upside potential.

Subsequent months proved much more positive for equities as the single-biggest macro overhang weighing on markets was removed, or at least significantly reduced, following a de-escalation in trade tensions between the US and China in May. This allowed focus to shift back to underlying company fundamentals, with markets rallying through the rest of the quarter as companies continued to report strong quarterly updates. The MSCI World index rose nearly 16% from its April lows, finishing the quarter up over 5%, while the tech-heavy NASDAQ rallied nearly 25% from its April lows to finish the quarter up nearly 11%.

Notably, many of the global innovators that had been hardest hit during the April sell-off were among the first to see their share prices recover as broader sentiment improved, validating our active approach throughout the quarter.

Strong fundamentals

Top contributors to Fund performance during the quarter all suffered sharp sell-offs in April but subsequently rallied on the back of broader market sentiment and strong earnings updates which underscored strengthening fundamentals and accelerating innovation profiles.

GE Vernova – the top contributor to Fund performance during the quarter – continues to go from strength to strength as the global leader in power generation equipment capitalises on the most significant electricity load growth since the post-World War II industrial buildout. Following two decades of near-zero growth, electricity consumption is breaking out globally, driven by the surge in demand from AI data centres, which are up to 10x more power-intensive than traditional facilities. In this context, it is installed base champions that benefit most directly: new capacity takes years to build, but existing fleets can be serviced and scaled immediately. GE Vernova's installed base – mostly high-efficiency gas turbines – already powers a third of the world's electricity, providing immediate exposure to this structural demand shift. The company's gas turbine backlog now stretches into 2029, with the electrification backlog also growing sharply, taking total backlog to $123 billion – a clear sign of supply-constrained secular growth. Pricing power is evident as customers with long-dated orders aren't deferring or negotiating, demonstrating the mission-critical nature of power infrastructure. This translated into strong quarterly results throughout the period, with accelerating revenue, expanding margins, and robust free cash flow generation. Management reaffirmed guidance despite absorbing an estimated $300-400 million tariff headwind (later revised down on an improving trade backdrop), highlighting the company's pricing flexibility and operational resilience. Importantly, data centre demand has yet to meaningfully enter the reported backlog, but management noted that one-third of slot reservation agreements already paid for relate to data centres, pointing to further upside ahead. With a hefty 60% of GE Vernova's backlog tied to high-margin services, the company is well positioned for sustained visibility and margin expansion over the next several years as global electrification accelerates.

Meanwhile our position in CoreWeave proved an astute addition during the quarter, emerging as a top contributor to performance. A next-generation cloud provider purpose-built for generative AI, CoreWeave delivers high-performance, GPU-accelerated infrastructure that meets the growing demand for accelerated 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 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 AI leaders including OpenAI and Mistral. CoreWeave delivered exceptional quarterly results in its first post-IPO update with revenues of $982 million up a staggering 420% year-on-year, whilst adjusted operating income of $163 million grew by 550%, both well ahead of consensus. Forward prospects remain exceptionally strong as demand for inference and fine-tuning workloads accelerate, with the company securing a five-year, $11.9 billion deal with OpenAI plus an additional $4 billion expansion contract, growing its revenue backlog to c$26 billion. 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, whilst being the first company to deploy Nvidia GB200 Grace Blackwell systems at scale for leading AI developers. With full-year revenues guided to c.$5 billion, management expects operating leverage to emerge as they scale, with adjusted operating margins forecast to reach 27-28% by 2027. Shares rallied impressively throughout the quarter, gaining over 300% as investors recognised the company's exceptional positioning in AI infrastructure and secular growth opportunity ahead. Given this rapid ramp-up we have been managing our position carefully, trimming our position as the company approaches our target price.

Broadcom also delivered yet another exceptional update in the quarter, with AI revenues accelerating to $4.4 billion – up 46% year-on-year – as the global leader in networking and custom ASIC semiconductor design continues to be at the forefront of the AI revolution. The company is scaling XPU cluster deployments at an aggressive pace to support the growing demands of hyperscaler AI infrastructure, with guidance for AI semiconductor revenue to reach $5.1 billion next quarter, a significant acceleration to 60% year-on-year growth. This momentum reflects the company's first-mover advantage in custom XPUs and AI networking solutions, with customers embarking on multi-year journeys to scale to clusters capable of supporting next-generation models and AI propagation across the economy. The company is capitalising on this advantage, with four additional hyperscaler customers "deeply engaged" in developing custom chips beyond the existing three clients (Alphabet, Meta, and ByteDance), significantly expanding the company's addressable market opportunity which is already set to reach $60-90 billion in 2027 alone – a 60% CAGR for AI revenues. The company continues to enhance its networking solutions to support high-bandwidth AI workloads, with AI networking maintaining roughly 40% of total AI revenue as increased cluster density drives continued demand for high-density, low-latency connectivity. Operating leverage continues to expand as the company scales, with record free cash flow generation positioning Broadcom well for sustained growth in the years ahead.

Elsewhere, CrowdStrike – the global leader in endpoint security – was another strong contributor to Fund performance in the quarter, continuing to demonstrate the strength of its AI-native Falcon platform as enterprises consolidate on unified cybersecurity solutions. The company's significant data advantage, detecting threats across the majority of the world's endpoints whilst processing 1.7 trillion signals daily, is fuelling its rapid expansion into adjacent categories including cloud, identity, and next-gen SIEM as demand grows for comprehensive AI-powered protection. The company delivered a strong quarterly update with revenue growing 20% to $1.1 billion and annual recurring revenue reaching over $4 billion, whilst maintaining an exceptional 97% gross retention rate. The company’s compelling customer value proposition – delivering $6 of return for every $1 invested in its platform within five months – is driving exceptional adoption, with module adoption rates reaching 48%, 32%, and 22% for six or more, seven or more, and eight or more modules respectively. CrowdStrike’s Falcon Flex offering is proving particularly impressive, total deal value growing 6x year-over-year to $3.2 billion as customers embrace customisable modular cybersecurity building blocks. The company’s rich dataset is powering next-generation AI-driven security capabilities, including Charlotte AI Detection Triage which automates alert analysis and streamlines security operations, alongside new AI-powered solutions like agentless network vulnerability assessments. Management’s confidence in its trajectory was underscored by the announcement of a $1 billion share buyback programme, whilst the company continues to target $10 billion in ARR as enterprises increasingly view Falcon as their cybersecurity platform of choice for the AI era.

On the other hand, while market sentiment broadly recovered through the quarter, the volatile backdrop meant any miss in earnings was ultimately punished, as evidenced by key detractors to Fund performance for the quarter. While misses are of course disappointing, we were reassured to see positive signals of fundamental strength which reaffirm our conviction in these companies in the longer term.

In Q2 this included Sweetgreen – a rapidly growing player in the fast-casual dining sector with its focus on healthy, customisable salads and grain bowls. This tech-savvy chain has gained popularity in the US by offering fresh, locally sourced ingredients through a convenient digital ordering system. Despite beating Q1 revenue expectations with $166 million in sales, the company faced headwinds from a c.3% decline in same-store sales and softer April trends, reflecting broader consumer uncertainty particularly in major markets like New York, Boston, and Los Angeles. However, fundamentals remain strong and Sweetgreen remains well positioned for long-term growth thanks to its innovative business model and strong competitive barriers. The company's Infinite Kitchen technology is delivering significant operational leverage with higher margins and improved efficiency, whilst its expanding network of local produce suppliers creates both cost advantages and quality differentiation. The successful nationwide rollout of its SG Rewards loyalty program is adding 20,000 new digital customers weekly, providing valuable data insights and customer retention capabilities. Additionally, management is strategically expanding the menu with mid-to-lower priced options and seasonal collaborations to broaden appeal, whilst the company's robust unit economics support its target of opening over 40 new restaurants in 2025. With restaurant-level margins of c.18% and adjusted EBITDA profitability achieved despite macro headwinds, Sweetgreen's scalable technology platform and differentiated positioning in the growing healthy fast-casual segment position it well for accelerated growth as market conditions normalise.

Meituan – China's leading local e-commerce platform for services – also weighed on performance during the quarter despite solid fundamentals. The company delivered strong Q1 results with revenue growing 18% to RMB 87 billion and net profit surging 87% to RMB 10 billion, driven by robust growth in its core food delivery business and expanding Meituan Instashopping platform. However, shares came under pressure alongside broader Chinese tech stocks amid ongoing macro uncertainties and investor concerns over the pace of China's economic recovery. Despite these near-term headwinds, Meituan remains exceptionally well positioned for long-term growth through its dominant market position across multiple consumer services categories, expanding international footprint with successful launches in Hong Kong and Saudi Arabia, and significant investments in AI and autonomous delivery technology. The company's scale advantages – with over 730 million annual users and 14.5 million active merchants – continue to drive operating leverage, whilst its $1 billion investment commitment to expand into Brazil demonstrates confidence in the global potential of its proven delivery model.

Meanwhile Novo Nordisk – the global leader in revolutionary GLP-1 weight-loss drugs alongside Eli Lilly (also held) – was also a key detractor during the quarter, driven by sentiment around competition and leadership changes alongside softer trial results from next-generation drugs. The company delivered mixed Q1 results with net profit beating expectations but Wegovy sales of $2.6 billion coming in below consensus, whilst management cut full-year sales guidance to 13-21% growth from 16-24%, largely due to one-off inventory correction and US drug compounding headwinds. Following these challenges, the board voted for longtime CEO Lars Fruergaard Jørgensen to step down after eight years – a notable change but welcome refresh as the company positions itself to overcome this temporary setback and capitalise on a structurally transformative growth story. The GLP-1 market remains vastly underpenetrated with only c.1% of the estimated two-thirds of US adults who are overweight or obese currently receiving treatment in a market forecast to reach over $100 billion by 2030. While recent CagriSema trial results came in slightly below expectations, the company's broader pipeline remains robust with multiple next-generation candidates progressing, including promising amycretin which showed strong early-stage results. Novo expects Wegovy sales to recover in H2 2025 as compounded drug competition diminishes following the FDA's shortage ruling reversal, whilst substantial manufacturing investments support long-term capacity expansion. With international expansion across 25 countries, approximately 70% global GLP-1 market share, and a proven innovation track record, we remain confident in the company's ability to navigate this competitive transition and capitalise on the significant long-term global opportunity ahead.

We remain active

Given the backdrop we were particularly active during the quarter, taking advantage of periods of macro-driven volatility to strategically increase our positions in the hardest-hit investments across the Fund and where share-prices had most starkly disconnected from fundamentals. This included topping up our positions in aforementioned companies which ultimately ended up being top contributors to performance, as well as those whose price recovery we expect to play out less abruptly, including leading innovators in the healthcare space such as Novo Nordisk, Eli Lilly, and Vertex Pharmaceuticals, as well as consumer-oriented companies such as Costco, Sweetgreen and L’Oreal.

We also took the opportunity to initiate positions in a number companies that have long been on our watchlist and where market volatility finally provided an attractive entry window, adding thirteen new companies to the fund in the quarter, including top-contributor Coreweave.

We also initiated a position Robinhood in mid-April after shares fell by over 40% from recent highs, providing an attractive entry point into this mobile-first retail investing platform that has democratised stock trading in the US through commission-free transactions. The company delivered exceptional results in the quarter, revenues growing 50% and EPS up 106% year-over-year driven by record customer engagement across trading, crypto, and new financial services. The company is successfully expanding wallet share and deepening customer relationships as customers consolidate more financial services on the platform, with Robinhood Gold subscriptions nearly doubling to 3.2 million users as a third of new customers adopted this premium service. The company continues to innovate to expand its market, launching Robinhood Strategies (an advisory service already managing $100 million for 40k customers), AI-powered Cortex, and Banking services that transform the platform from pure brokerage into comprehensive wealth management. The company is also expanding strategically through the acquisition of TradePMR (adding $41 billion in platform assets to serve financial advisors), international growth reaching 150k customers, and the acquisition of Bitstamp which will enhance global crypto capabilities. Operating leverage is emerging as the company scales, adjusted EBITDA margins expanding to 51% as transaction volumes ramped – options contracts hit a record 500 million while crypto revenues doubled to $252 million. With total platform assets reaching $221 billion, Robinhood is positioning itself increasingly well to capture the expanding digitally native investor market, reflected in a confident management outlook and increased $1.5 billion share repurchase authorisation.

We also initiated a position in FICO mid-May after shares fell by over 30% post-earnings – their 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, the 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 shares have subsequently recovered by over 20% from their May lows.

To finance these purchases, we reduced a number holdings of which performed well at different stages throughout the quarter, and exited certain companies whose upside potential was no longer sufficient. This varied month to month, but over the course of the quarter saw us trimming strong performers such as GE Vernova and CoreWeave, technology sector stocks such as Amphenol and Palantir, and financial holdings such as Affirm and Upstart. These were all companies we had bought or topped up when they sold-off during March and April, but each of which saw strong subsequent rallies enabling us to reallocate capital to better upside opportunities elsewhere. We also exited positions in a number of stocks which had achieved our target prices such as Airbnb, Arista Networks, On Holding, and TSMC – each of which saw shares rally by 20-60% by quarter-end from April lows. As always, 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 cycles across different sectors in the years ahead. This was 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 – will ultimately be rewarded in the market.

We look forward to sharing insights from our recent research trips in the coming weeks. With the pace of innovation accelerating, and numerous new structural growth opportunities emerging, we are seeing a lot of exciting new opportunities emerge across the industry landscape, bolstering our confidence that the winners of this new innovation cycle will be different from those of the last.

As always, we will continue to maintain our valuation discipline, taking advantage of further market dislocations to invest in innovative global leaders with strong competitive barriers 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.