Liontrust Special Situations Fund

June 2019 review

The Liontrust Special Situations Fund returned 2.7%* in June compared with the 3.7% return from the FTSE All-Share Index.

 

UK stocks joined in the global equity rally in June as indications of looser monetary policy gave investors a reason to add risk. In the US, there has been a growing consensus that the Federal Reserve will need to cut rates, having tightened its policy gradually over the last four years.

 

In its policy meeting in June, members of the Federal Open Market Committee stated that they will “act as appropriate to sustain the expansion”, while also reducing their inflation forecast for this year. Adding to the dovish tone was European Central Bank President Mario Draghi, who noted that additional stimulus would be required in the eurozone if there is not an improvement in the economic outlook.

 

In the UK, political uncertainty was the market’s main concern. Investors determined that a Boris Johnson-led government would increase the chances of a No Deal Brexit as he emerged as the leading candidate to become the next Prime Minister. The pound dropped to its lowest level against the dollar in 2019, not helped by poor data which showed the UK economy shrank by 0.4% in April.

 

The decline in sterling meant that UK large cap stocks, which are predominantly internationally exposed, performed better than mid and particularly small cap companies. The FTSE 100 returned 4.0% in June, while the FTSE 250 rose 2.9% and the FTSE Small Cap (ex-IT) declined 2.3%. This was a headwind for the Fund’s relative performance as it has a greater bias to mid and small cap stocks than the FTSE All-Share Index.

 

However, some of the Fund’s large cap holdings benefited from this split in market cap performance. AstraZeneca (+10.4%), Compass Group (+6.1%) and Royal Dutch Shell (+4.4%) and were among the Fund’s top risers.

 

Company news was fairly sparse in June. Wood Group (+15.5%) has had a difficult time of late, but the oilfield services company’s shares found some relief following a pre-close half year trading update saying it has delivered an improvement in earnings growth and margin. The latter was a result of a strong performance by its Asset Solutions Europe, Africa, Asia and Australia and Environment & Infrastructure businesses. Wood Group maintained its full year outlook for adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation).  

 

Craneware (-37.8%) had been up on the month until a late June trading statement highlighting sluggish sales growth in the second half of the year. The US healthcare-focused software provider stated new product launches on its Trisus platform have seen a slower than anticipated uptake by clients in the second half of the company’s financial year and as a result full-year revenue growth is expected to be around 6%. This is a marked slowdown from the 16% recorded in the previous financial year.

 

Fund supermarket Hargreaves Lansdown (-15.3%) suffered in the wake of the suspension of the Woodford Equity Income Fund. The high profile fund suffered a series of redemptions and manager Neil Woodford announced that withdrawals will be suspended. Hargreaves Lansdown had the Woodford Equity Income Fund in its closely followed Wealth 50 list and has long promoted Woodford. The company dropped the fund from the Wealth 50 list following the suspension.

 

Despite issuing strong full year results highlighting revenue and profit growth, Scottish cloud computing provider iomart Group (-9.4%) saw its shares sink in June. The company’s main Cloud Services segment grew revenue by 8%, a quarter of which was organic growth, with benefits flowing from a revamped sales and marketing function. Management added that the first two months of the current financial year has started off in line with expectations.

 

Positive contributors included:

Domino’s Pizza Group (+18.3%), Globaldata (+16.0%), Spectris (+16.0%), John Wood Group (+15.5%), and Rotork (+10.1%).

 

Negative contributors included:

Craneware (-37.8%), Hargreaves Lansdown (-15.3%), AA (-11.5%), iomart Group (-9.4%) and PayPoint (-9.0%).

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

 

 

Jun-19

Jun-18

Jun-17

Jun-16

Jun-15

Liontrust Special Situations I Inc

6.5

15.3

23.0

6.9

8.9

FTSE All Share

0.6

9.0

18.1

2.2

2.6

IA UK All Companies

-2.3

9.1

22.5

-4.1

7.0

Quartile

1

1

2

1

2

 

*Source: Financial Express, as at 30.06.2019, total return (net of fees and income reinvested), bid-to-bid, institutional class. Non fund-related return data sourced from Bloomberg.

 

**Source: Financial Express, as at 03.07.2019, total return (net of fees and income reinvested), bid-to-bid, primary class.

 

For a comprehensive list of common financial words and terms, see our glossary here.

 

Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Some of the Funds managed by the Economic Advantage team invest primarily in smaller companies and companies traded on the Alternative Investment Market.  These stocks may be less liquid and the price swings greater than those in, for example, larger companies. The performance of the  GF UK Growth Fund may differ from the performance of the  UK Growth Fund and will be lower than its corresponding Master Fund due to additional fees and expenses.

Disclaimer

The information and opinions provided 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.  Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Wednesday, July 24, 2019, 4:57 PM