Volatility from tariff concerns early in the quarter was offset by strong company results, driving the Fund to outperform its benchmark. Gains from Paragon Bank, AJ Bell, and Gym Group outweighed losses from Mobico, while new positions in Howdens and Renewables strengthened future growth prospects.
It was a strong quarter of performance for the UK Ethical Fund, delivering 8.6% over the three months. That's 6.2% ahead of its benchmark, the MSCI UK. It was pleasing to see this over a very volatile quarter, as tariff concerns overshadowed the macro-economic picture in April. The subsequent recovery was based on strong financial returns and positive outlook statements from many of our portfolio companies. Three notables amongst these were Paragon Bank, the innovative mortgage provider and lender to SMEs. Also AJ Bell, the fast growing platform for UK savers and investors, linked to our theme of 'saving for the future'. And finally, Gym Group, which encourages healthier lifestyles through its 240 low cost gyms across the UK.
Disappointing performance unfortunately continued in Mobico, the operator of European and UK bus and coach and rail services. We believe there is now risk that they have insufficient capital and so have exited our position. On the other side, we've added to Howdens, which provides kitchen products to the UK construction sector. The UK domestic economy, we believe, will see more stability and modest growth. Anything approaching normality will be supportive for Howdens. We also added to Greencoat Wind and TRIG, The Renewable Infrastructure Group, which are offering yields approaching 10% alongside modest asset value growth. These companies have been critical to the UK achieving nearly 40% renewable electricity in the last year from wind and solar assets, and they continue to have good prospects. Our positioning remains focused on mid-cap quality growth companies that are aligned with our sustainable investment themes. Our analysis suggests that these continue to offer strong growth over the coming years, and yet they are trading at significant valuation discounts to their historic average. For this reason, while we are encouraged by this short recent period of strong performance, we believe there is so much more to come.
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.
- All investments will be expected to conform to our social and environmental criteria.
- 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 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.
- 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.
- 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.
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.
