Liontrust Balanced Fund

Q4 2020 review

The Liontrust Balanced Fund returned 4.1% over the quarter, versus its average peer in the IA Mixed Investment 40%-85% Sector, which returned 8.0%*.

It is difficult to resist the attraction of ‘vaccine news provides a shot in the arm for markets’ as a review of the last quarter of a challenging year, offering hope of a better 2021.

We also saw the end of four-and-a-half years of Brexit negotiations and a promise of more traditional politics under US President-elect Joe Biden, potentially alleviating the trade wars that have hit sentiment. What recent events – particularly three doses of vaccine news – have allowed investors to do is recalibrate expectations for many companies, creating more certainty around valuations given the fact a return to normality is in sight.

2021 promises the end of three market-influencing factors, which could mean more clarity than has been the case for some time: the first is the transition from Trump to Biden, the second is a reduction in the impact of Covid-19, and the third is Brexit. This may help restore the disconnect between market hope and economic reality, which, for us, has continued to underpin – and undermine – surging equities. The last two months of 2020 saw broader performance and if that continues, there should be stronger support for markets than the narrow leadership, from a handful of tech giants, that persisted throughout much of 2020.


We were encouraged by the Fund’s strong absolute and relative performance in 2020, particularly given the volatile nature of markets in the face of Covid-19. Clearly, the Fund handed back some relative performance in Q4, a period during which value stocks enjoyed a considerable rebound. This was buoyed by news of a vaccine, with more cyclical/physical economy stocks leading markets.


We continue to focus on technology-related stocks or those companies utilising technology to gain a competitive advantage versus their industry peers. Technology companies that enable businesses to maintain effective remote workforces, improve digital efficacy and drive operational improvements are showing to be consummate winners, providing growth in a low growth world that rewards long duration assets due to depressed interest rates. Other technology companies that contribute to this rising digital economy by providing ecommerce solutions (either directly or enabling others) providing hardware, software tools for new digital projects all stand to benefit as well. We have seen that Covid-19 has not only accelerated the uptake of these long-standing trends, but likely also increased their long-term scale.

At the stock level, two long-standing holdings in the Fund, Twilio and RingCentral, were the most significant contributors to performance over the quarter. RingCentral provides business with an easy to use cloud communications platform for employees. It is as simple as downloading an app on their own devices (or work devices) from which users can access a suite of own brand or 3rd party communications tools. RingCentral has been thriving off a trend to shift processes to the cloud and avoid unnecessary equipment capex by allowing employees to use their own, more familiar, devices for work purposes.

Twilio, which provides a communications API platform for software developers, again performed strongly over the quarter. If you’ve received a text, call or email from a company through an app or webpage, it is likely that it used a Twilio plug-in solution. With the rising need for an online/virtual presence for all businesses, Twilio stands to benefit by providing the necessary tools that developers need to be able to provide this service.

On the other side of the ledger, at the stock level, Alibaba was the most significant contributor to the Fund’s relative underperformance over the final quarter of the year. The company faced a number of unprecedented challenges recently, namely the suspension of Ant Group’s long-awaited IPO (Alibaba owns a c.33% stake in Ant). Other detractors at the stock level included NVIDIA, Reckitt Benckiser and AstraZeneca.

Salesforce was another detractor to performance over the period under review. The company has lagged the market and its software peers in Q4 (and the year as a result) as it looks to close its largest acquisition to date, the $27.7bn purchase of Slack. Part of the potential drawback with Salesforce is its highly acquisitive nature under its founder CEO Marc Benioff, and its latest acquisition of a company that lacks a track record of profitability for what could be a rather inflated price has understandably caused concern. We would contend, however, that Salesforce’s acquisition history has actually been remarkably successful. For example, while still in early stages, the recent acquisition of Tableau now looks to have been done at bargain price given recent enthusiasm for high growth software companies, and the tie-in to Salesforce’s platform looks to already be paying dividends. Slack has no doubt achieved viral growth and could well be a valuable component of the salesforce portfolio when integrated alongside its various promising product initiatives.

Furthermore, the Fund’s exposure to exchange-traded put options was a significant detractor to performance in the final quarter as markets were boosted by vaccine news.

Clearly, many western nations remain in strict lockdown conditions. Furthermore, the true long-term economic cost of the pandemic remains difficult to fathom at this stage. As such, we believe it is vital investors remain vigilant and we expect volatility to be a key feature of the months ahead.

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








Liontrust Balanced C Acc






IA Mixed Investment 40-85% Shares













*Source: FE Analytics as at 31.12.20


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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.

Monday, January 25, 2021, 3:54 PM