Liontrust GF Special Situations Fund

November 2020 review

The Liontrust GF Special Situations Fund returned 8.3%* in November. The Fund’s comparator benchmark, the FTSE All-Share, returned 12.7%.


Having nursed heavy year-to-date losses since the Covid-19 pandemic sparked a steep drop in February and March, the UK stockmarket bounced back in November. The rally in global equity markets was catalysed by positive Covid-19 vaccine news. Early in the month, trial results for a Pfizer/BioNTech vaccine showed over 90% efficacy. This was followed by positive trial results for vaccines being developed by both Moderna and AstraZeneca/University of Oxford.


As investors looked with optimism to a return to social and economic normality in 2021, the upward adjustment in share prices was sharp; the FTSE 100 recorded its largest monthly gain since 1989. All major market capitalisation segments of the UK market registered double-digit percentage gains. The breakdown of the market’s gains suggests a reversal of the trends witnessed during Q1: those stocks and sectors that were hardest hit by pandemic lockdown measures saw the greatest relief rally on vaccine hopes. For example, the top five FTSE All-Share risers in absolute terms included three from the travel & leisure sector: Cineworld Group, On the Beach Group and Saga.


The oil & gas sector was another prominent beneficiary of the rally. With oil prices tumbling during the pandemic, the sector had lost 56% in 2020 heading into November. In November it rallied by 30%.


Earlier this year, the Fund accrued good relative performance against the index partly due to its insulation from some of the areas worst affected by the pandemic; it has low exposure to the financials sector for example, with no banks holdings. As investor sentiment and the market recovered very sharply on vaccine progress, it lost some of this ground. Although the Fund had exposure to the oil & gas sector strength via John Wood Group (+41%), Royal Dutch Shell (+34%), BP (+28%) and Plexus Holdings (+27%), it has lower than average overall sensitivity to the vaccine rally.


This return profile is entirely consistent with the manner in which the Fund is managed. Funds run under the Economic Advantage process have a tendency to generate good relative performance during market sell-offs or steady market conditions, which can be partially offset by a lag during short, sharp, sentiment-driven rallies. We believe this may be due to the investment process’s focus on dependable businesses with high barriers to competition and strong cash flow returns on capital, which we think can prove to be more defensive in times of market stress and reliably deliver on expectations in more normalised market conditions. We believe that – on average – the degree of downside protection afforded by the Fund’s portfolio of companies exceeds the lag during rallies, enabling us to target outperformance over the long term.


Beyond the oil & gas holdings, there were a number of stocks that benefitted from the hope offered by the vaccine of an imminent return to normal trading patterns. Those companies whose businesses have been most affected by lockdown and other restrictions experienced the biggest rallies: temporary power provider Aggreko (+27%), global catering company Compass Group (+26%), events and business analytics specialist RELX (+14%), and recruiter PageGroup (+16%). While Compass Group’s full-year results announcement played second fiddle to the vaccine rally in driving its shares higher, Aggreko did gain some extra impetus from a trading statement. It has seen encouraging signs of increasing actitivy levels, leading it to predict 2020 pre-tax profit towards the top end of the £80m - £100m guidance it had previously issued.

Recent portfolio addition Future (-15%) was among the stocks that didn’t participate in the market rally as investors digested details of its surprise offer of nearly £600m for GoCo Group. GoCo owns a handful of price comparison brands such as GoCompare, which Future believes will complement its own specialist consumer and B2B publishing brands. The deal, which has been recommended by GoCo Group, would be financed partly through cash and partly through the issue of new shares in Future. The Fund’s position in Future was still being built from a low level during the month, which limited the negative performance contribution. Sage Group (-4.8%) also lost ground. Although it recorded 9% organic recurring revenue growth in the year to 30 September, it cited an uncertain outlook when forecasting 3% - 5% growth in the same measure next year.


Further down the market cap spectrum, Craneware (+42%) made strong gains after an AGM statement outlined sales growth between July and October that was significantly ahead of the prior year comparable, underpinning expectations of year-on-year growth for the second half of 2020 and a return to double-digit growth in future periods.  The company, which supplies software solutions to US healthcare providers, had recorded a flat revenue performance in the year to 30 June 2020 as Covid-19 impeded the final quarter’s sales.


Gift packaging specialist IG Design (+38%) had already released a trading statement in October outlining better-than-expected sales growth of 41%, but at that point it refrained from taking a more bullish tone on the full-year outcome due to ongoing Covid-19 uncertainty. However, in November’s interim results, IG Design was comfortable stating that its full year performance was on track to exceed market expectations. 


In July, dotdigital (-5.8%) stated that results for the year to 30 June 2020 would comfortably exceed market expectations, before going on to release an October update on Q1 of its new financial year, in which it stated that trading for the year to 30 June 2021 would also exceed consensus forecasts. In November, it released full results covering the year to 30 June 2020 and it once again upgraded its guidance for the 2021 outcome. But shares in the company appeared to be fully up with events after the spate of upgrades, and they traded a little lower on the month. Data analytics and consulting company GlobalData (-4.8%) also slid despite issuing a solid looking trading update which maintained its 2020 earnings guidance.


We added a new portfolio position in Impax Asset Management. The company is a specialist asset management company focusing on sustainable investment strategies, with over £20bn of AUM and an attractive tailwind of structural growth behind it from the shift to ESG investing. It was added to the Fund on the strength of its recurring income, as it generates revenue from ongoing fees levied on the assets it manages for clients.


Positive contributors included:

John Wood Group (+41%), Royal Dutch Shell (+34%), BP (+28%), Aggreko (+27%) and Compass Group (+26%).


Negative contributors included:

YouGov (-7.7%), dotdigital (-5.8%), Sage Group (-4.8%), GlobalData (-4.8%) and Gamma Communications (-3.9%)


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








Liontrust GF Special Situations C3 Inst Acc GBP






FTSE All Share







*Source: Financial Express, as at 30.11.2020, total return (net of fees and income reinvested), sterling terms, C3 institutional class. Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 30.09.2020, total return (net of fees and income reinvested), primary class.


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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. 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.


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, December 16, 2020, 4:16 PM