Liontrust Balanced Fund

Q1 2020 review

The Liontrust Balanced Fund returned -5.4%* over the quarter, considerably outperforming its average peer in the IA Mixed Investment 40%-85% Sector, which returned -15.4%.

The first quarter of 2020 proved to be one of the most painful quarters on record for UK and global equity markets. The spread of the COVID-19 pandemic, and its impact on the global economy, caused significant sell-offs in February and March as the enormous immediate economic impact of the social distancing measures required to fight the pandemic became apparent to investors. The market appeared to find a floor towards the end of the quarter, largely thanks to the unusual yet arguably needed combination of both monetary and fiscal easing on the parts of global central banks and governments.

The Fund’s outperformance over the quarter was driven by a number of factors. The most of important of these, however, was the Fund’s exposure to exchange traded put options, which were strong contributors to the portfolio’s returns as global markets sold-off aggressively. Within our equity portfolio, the Fund benefited from exposure to technology stocks. In particular, the Fund’s exposure to disruptive innovating companies. It is early days to consider the longer-term effects of the pandemic and economic fallout, however, it is plausible that some existing trends towards the greater use of digital technologies, such as internet-based communication, will accelerate, benefiting disruptors. In keeping with this, some of the strongest performing holdings in the Fund during the quarter were major technological disruptors and enablers of disruption, including Amazon, Microsoft, Tencent and Nvidia. The largest detractors to the Fund’s performance included the Liontrust Latin America Fund, with Latin American equities bearing the brunt of the COVID-19 crisis within emerging markets, as well as Mandarin Oriental and 3i Group – both of which were hurt by the introduction of worldwide social distancing measures.

Much of the global economy currently sits in a significantly shut-down state while social distancing measures are in place to fight the virus. While government and central bank policies have built a bridge to a recovery in economic activity when social distancing measures are relaxed, the strength of the recovery – and outlook for the stock market – is, in the view of the Liontrust Global Equity team, critically dependent on three factors.

First, Western governments must put in place an infrastructure for living with the virus at an acceptable level of risk while running the economy at a decent level of activity until a vaccine arrives. This means successfully suppressing the virus through a scaled-up testing and tracing regime while protecting the vulnerable, as opposed to continuing with blanket shutdowns for the foreseeable future. Numerous East Asian governments have already established such an infrastructure, but so far Western governments have generally failed to do so.

Second, when the time is appropriate, macroeconomic policy must swiftly move from ‘defence’, in the sense of tiding over the economy during the shut-down, to ‘attack’, in the sense of delivering significant monetary and fiscal stimulus to kick-start demand.

Third, and highly dependent on the first two factors, households and businesses must feel confident enough to increase spending again reasonably quickly from current extremely low levels, rather than engage too much in building up precautionary savings in the face of ongoing economic uncertainty. Some of the key leading economic indicators to monitor during the coming months in this regard will be consumer confidence, unemployment, household saving rates and business investment intentions.

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







Liontrust Balanced C Acc






IA Mixed Investment 40-85% Shares













*Source: FE Analytics as at 31.03.20


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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. Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.


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.

Thursday, April 23, 2020, 2:43 PM