Liontrust Global Smaller Companies Fund

The Liontrust Global Smaller Companies Fund returned 1.9% in June, compared with the 3.2% return of the MSCI ACWI Small Cap Index and an average return of 2.4% in the IA Global sector, its comparator benchmarks.

Global equities rose in June, led by US stocks which saw earnings expectations rise from lowered levels as a series of trade negotiations took place, including with China, ahead of President Trump’s tariff pause running out on 9 July. Israel attacked Iranian nuclear facilities and regime officials, causing a temporary spike in oil prices which fell back after the US intervened and the President shortly after called for a ceasefire. Markets have begun to look ahead towards the ‘Big Beautiful Bill’ – particularly its impact on corporate tax cuts, inflation, and government debt affordability.

There was a lot of news, but what was the impact on corporate decision-making and market pricing? Well first, trade negotiations are incrementally positive versus April’s situation of tariffs imposed with short notice, so stock prices have rallied assuming deals will be signed, but profit expectations are more slowly catching up as companies remain reticent on guidance for 2025.

Indeed, from companies we met with over the month, corporate spending globally remains in cautious mode (particularly for the industrial sector), even in the USA given the outlook for input prices could be negative if tariffs lead to cost inflation. The dollar continues to weaken as investors question the affordability of a greater debt load in the US and whether the ‘US exceptionalism’ trend is coming to an end.

In this Fund, the collection of high quality companies, led by aligned management teams (who own significant portions of their own stock), with strong profitability and pricing power, carry on regardless. The slight underperformance versus the index in June was not driven by any particular sector skew, but rather by stock idiosyncrasies and style (value has outperformed quality and growth in recent months given higher bond yields).

Top contributors:

• Chroma ATE (+37% total return in sterling terms) – Chroma performed well, as semiconductor stocks broadly have rallied since April lows (see Philadelphia Semiconductor Index YTD and Nvidia +69% yoy sales growth in Q1). Chroma ATE is a Taiwanese semiconductor test company with niche technical leadership, particularly in the burgeoning system-level test (SLT) vertical, which evaluates performance of integrated circuits or whole devices in environments that emulate actual end-use applications. In 2024, Chroma ATE outgrew all its competitors in SLT, highlighting its technical prowess.
• Installed Building Products (+12%) – Shares rose over the month alongside housing related stocks as US treasury yields fell. US new home purchases and construction are tightly correlated to treasury yields as these drive mortgage rates. At the moment, new starts remain in a cyclical trough as mortgage rates are very high and therefore affordability for many Americans is difficult. As long-term investors, we think this downcycle provides a great entry point into a company with c.30% share of the residential insulation installation market, a large distribution network, many bolt-on M&A opportunities, and an impressive track record of free cash flow per share growth.
• Inficon (+12%) – Like Chroma, Inficon rallied along with the broader semiconductor sector. Inficon is a Swiss company with long term family ownership, which has market leading positions in various leakage detection systems for semiconductor cleanrooms, as well as in air conditioning, refrigeration and automotive manufacturing.

Largest detractors:

• GlobalData (-18%) – The shares fell as two takeover bids from private equity buyers fell through during the month. GlobalData now trades at its lowest valuation for 20 years – versus its own history and relative to the market (MSCI ACWI). This despite growing sales and earnings at 16% and 19% compound rates respectively over 10 years, owning best-in-class proprietary data sets across multiple sectors, and benefitting from a strong recurring revenue base. If anything, the two recent bids highlight the outstanding value on offer here.
• Cellavision (-7.3%) – No particular newsflow in June. Around a third of Cellavision sales are to US customers, therefore no final trade agreement being reached between the EU and US over the month likely weighed on the stock. However, we remain very excited about Cellavision given it is the market leader (60%+ share) in digital haematology microscopy (inspecting blood cells), with an impressive growth runway (c.80% of the market still uses manual microscopy), is very profitable (17% CFROC), yet trades at a 10-year valuation low.
• Paylocity (-6.6%) – The stock was weak over the month as US private sector job growth data indicated a slower trend recently. Paylocity’s highly customisable all-in-one platform streamlines HR operations with a particular focus on small and medium-sized businesses. Therefore, short term revenue growth expectations are impacted by private sector job employment trends.

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

* Source: FE Analytics, as at 30.06.25, total return, net of fees and income reinvested. The current fund managers’ inception date is 14.01.25.

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.