Liontrust UK Ethical Fund

Q2 2018 review

The Fund returned 9.3% over the quarter, outperforming the UK All Companies sector average of 9.1% and slightly lagging the MSCI UK Index’s 9.4*.

 

Our process targets businesses that can grow structurally, driven by the shift towards a global economy that is more efficient, provides a higher quality of life and is more resilient.

The UK market recovered strongly from the lows in March as better economic data and encouraging corporate news buoyed markets.

Within the portfolio, Sophos – a company that offers protection against viruses, malware, spyware, intrusions, unwanted applications, spam, policy abuse and data leakage – was a key positive contributor during the quarter. Sophos is a beneficiary of our Enhancing digital security theme and continues to demonstrate the growing demand for digital security products.

More recently, a number of high-profile breaches have led to growing concerns about how personal data is managed and we view the European General Data Protection Regulation (GDPR), which came into force from 25 May this year, as a clear indicator for this trend to continue for many years.

Elsewhere, ZPG Group, the property technology company that owns popular brands such as Zoopla and uSwitch, received a bid approach from the US private equity company Silverlake. Our internal valuation of modelling future expected cashflows led us to value the business at some 22% above the £4.90 bid price and as such, we felt the offer undervalued the prospects of the business: as minority shareholders however, we had to accept it.

 

This is not the first time one of our holdings has been acquired opportunistically by businesses with longer investment horizons than most public market participants. ARM and Shawbrook are two examples that come to mind of businesses that featured in our portfolios that were also acquired at a considerable discount to their intrinsic value.

 

Another strong contributor over the period was Kingspan, the building thermal insulation producer.

 

Detractors included Crest Nicholson, as the homebuilder reported slowing sales of higher priced houses, but we believe it still has strong long-term prospects due to the structural supply-demand imbalance of housing within the UK.

During the quarter, we sold our position in Melrose. Its acquisition of GKN means the business now has too much defence exposure, which is excluded from this Fund’s strategy.

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

 

Jun-18

Jun-17

Jun-16

Jun-15

Jun-14

Liontrust UK Ethical 2 Acc

13.3

30.2

-8.9

18.1

11.4

MSCI UK

8.2

16.7

3.4

-0.2

12.3

IA UK All Companies

9.1

22.5

-4.1

7.0

14.0

Quartile

1

1

4

1

4

 

*Source: Financial Express, as at 30.06.18, primary share class, total return, net of fees and income reinvested.


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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. 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 content 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.  It contains information and analysis that 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 of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. 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.

Tuesday, July 24, 2018, 11:17 AM