The Fund underperformed in a volatile quarter shaped by weak earnings guidance and escalating US tariffs. While short-term sentiment hit high-multiple stocks and exposed sectors, the team remains focused on long-term growth in companies driving a cleaner, healthier, and safer world.
Our portfolio performed in line with the benchmark during March, with both declining in absolute terms. The largest detractors came from our longer duration holdings. So these are companies on relatively high multiples, such as Intuitive Surgical and ServiceNow. But we also saw Broadcom shares fall nearly 16% in the month due to concerns over the semiconductor industry, given how interconnected it is between the US and China. On the topic of tariffs, we think Howard Marks has it right when he says, "nobody knows". All we know for sure is that the situation is dynamic and the seemingly constant news flow makes it very difficult for companies when making decisions about future capital investments. Now should this sustain, it's unlikely to be positive for the broader economy. We therefore continue to focus on finding companies that are helping to make the world cleaner, healthier, and safer. And our investment decisions are based on what the company will earn five years from today. Remaining long-term in one's thinking is even more imperative during such volatile and uncertain times.
A top performer during the quarter was VeriSign, whose shares rose 23% over the period. The company enables the security, stability and resiliency of key internet infrastructure and services. VeriSign is a simple business, but it performs a critically important role in the global economy by operating two of the most important global internet root servers. Essentially, it's the company's job to ensure websites that end in .com are running 24 hours a day, 7 days a week, 365 days a year. As such, it is exposed to our theme of 'Enhancing Digital Security'. Now we've held the shares for five years in the Global Fund and since launch for the US Fund. After a period of strong growth during the pandemic, the number of .com websites started to fall and there were some concerns about when or indeed if this would return to growth. The start of this year finally saw the volume of domains growing again, causing the company to upgrade their guidance for the full year and resulting in a return of confidence in future growth. Given the mission-critical nature of their services, VeriSign is exactly the sort of company that performs well during times of market stress. And we have been rewarded for continuing to hold on to the shares.
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 Sustainable Investment team:
- Are expected to conform to our social and environmental criteria.
- May hold overseas investments that 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 a Fund.
- May hold Bonds. Bonds are affected by changes in interest rates and their value and the income they generate can rise or fall as a result; The creditworthiness of a bond issuer may also affect that bond's value. Bonds that produce a higher level of income usually also carry greater risk as such bond issuers may have difficulty in paying their debts. The value of a bond would be significantly affected if the issuer either refused to pay or was unable to pay.
- 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 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. 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, under 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. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions. 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. The use of derivative instruments that may result in higher cash levels. Cash may be deposited with several credit counterparties (e.g. international banks) or in short-dated bonds. A credit risk arises should one or more of these counterparties be unable to return the deposited cash.
- Do not guarantee a level of income.
The risks detailed above are reflective of the full range of Funds managed by the Sustainable Investment 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.
