Simon Clements

A postcard from the West Coast

Simon Clements

Simon Clements: A postcard from the West Coast

Having spent the last week visiting the West Coast of the US, I was struck by the innovation and growth of businesses in San Francisco, Silicon Valley, Phoenix, San Diego and Los Angeles. The region is a hotbed of prospective investments for us.

In a fast changing world, we believe that the companies that will survive and thrive are those that can make the world more efficient, provide a better quality of life and contribute to a more resilient global economy. Making the world more efficient is something that the West Coast does better than just about anywhere else; one of the reasons that seven out of the 49 companies held within our Liontrust Sustainable Future Global Growth Fund are based there. 

Among the companies I met were semi-conductor designers NXP and Cadence Design Systems, both leaders in their respective fields globally. Discussions with the management teams and tours of R&D facilities served to confirm our investment thesis: that technological improvements are moving quickly from end markets such as smartphones, to new more nascent markets such as autos and machines (or the Internet of Things). These new markets are where we are observing the fastest pace of change, and we believe that autos and more efficient machines are likely to be the technology industry's key markets for the next ten years.

We also met two of our key holdings in the global financials industry; First Republic Bank and Western Alliance Bank. You may be surprised to hear that banks have been able to find their way into a fund which has sustainability at the core of its investment process. But these banks both have characteristics which we think support resilient economic growth. They have a simple operational structure, engaging primarily in the ‘traditional’ banking business model of taking customer deposits in order to fund lending activities; they do not dabble in corporate finance, trading, securitisation or any other peripheral activity which might act as a red flag. Vitally, they both offer best-in-class customer service. They understand their customers and the product that is right for them, then they deliver this product at a competitive rate. When it is done well, customer service can be key, and it is allowing both First Republic and Western Alliance to grow their loan books at a rate which is multiple of the overall economic growth rate and also exceeds their banking peers. Simple banks that deliver great customer service ensure economies can grow, but grow in a resilient way.

• Past performance is not a guide to future performance. • Do remember that the value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. • The majority of the Liontrust Sustainable Future Funds have holdings which are denominated in currencies other than Sterling and may be affected by movements in exchange rates. Some of these funds invest in emerging markets which may involve a higher element of risk due to less well regulated markets and political and economic instability. Consequently the value of an investment may rise or fall in line with the exchange rates. Liontrust UK Ethical Fund, Liontrust SF European Growth Fund and Liontrust SF UK Growth Fund invest geographically in a narrow range and has a concentrated portfolio of securities, there is an increased risk of volatility which may result in frequent rises and falls in the Fund’s share price. • Liontrust SF Managed Fund, Liontrust SF Corporate Bond Fund, Liontrust SF Cautious Managed Fund, Liontrust SF Defensive Managed Fund and Liontrust Monthly Income Bond Fund invest in bonds and other fixed-interest securities - fluctuations in interest rates are likely to affect the value of these financial instruments. • If long-term interest rates rise, the value of your shares is likely to fall. If you need to access your money quickly it is possible that, in difficult market conditions, it could be hard to sell holdings in corporate bond funds. This is because there is low trading activity in the markets for many of the bonds held by these funds. Mentioned above five funds can also invest in derivatives. Derivatives are used to protect against currencies, credit and interests rates move 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 information and opinions provided should not be construed as advice for investment in any product or security mentioned.  • Always research your own investments and consult with a regulated investment adviser before investing.

Wednesday, May 24, 2017, 2:17 PM