Liontrust Global Alpha Fund

H1 2020 review

The Liontrust Global Alpha Fund returned 21.3% over the first half of the year, considerably outperforming the MSCI AC World Index’s 0.5% gain and the IA Flexible Investment’s loss of -4.0%*.

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 second quarter saw the global economy venturing forth on the path to recovery following the previously unimaginable disruption caused by COVID-19. Fuelled in no small part by the aforementioned large-scale fiscal and monetary stimulus, markets have recovered much of the decline suffered as the pandemic swept across the globe. The divergence between developed and emerging market returns can be at least partially attributed to the major developed economies putting together notably larger stimulus packages compared with the major emerging markets.

The Fund benefited from its exposure to technology stocks in the first half of the year. Tech companies, particularly those in popular, fast growing industries like software and e-commerce, have continued to outperform on both an operational level and in equity markets. Software remains a favoured sub-sector in the Fund. Software products are uniquely positioned in this crisis in that they still serve mission critical functions for businesses to continue to operate, and a decentralised workforce need just as many, if not more, subscriptions and need more cloud capability as accessing on-prem functions from afar is complicated can incur latency issues, and may simply not be feasible. Thus, we have seen the current crisis as an accelerant not only to the ongoing shift to the cloud but also to software that allows greater efficiency and productivity to a decentralised workforce.

A great example of this is in communications software with a long time holding, RingCentral. The company 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 such as standard SMS messaging to Zoom video conferencing. 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. Outlook for the company pre-Covid19 was significantly boosted after announcing a recent partnership deal with Avaya that gave it exclusive access to 100 million seats that Avaya sells to (to frame this potential impact it is worth noting RingCentral had only 2 million seats prior to the deal). The shift of vast amounts of workers having to work from home due to Covid-19 means that communications software and platforms like RingCentral are in higher demand than ever to ensure seamless communication and coordination of employees.

Amazon has held strong during this crisis. The source of the company’s strength is twofold. First the demand for its AWS cloud platform has remained high as client businesses continue to utilise cloud applications to manage a decentralise workforce as well as other internet clients such as Netflix and Ocado who have seen a surge in demand relying on AWS’s infrastructure. Secondly, there has been a jump in demand on its delivery platform as the US and other markets go into varying levels of lockdown, customers are forced rely on Amazon and its fulfilment infrastructure for provision of essential goods and commerce. This rise in demand has been so acute that Amazon recently put out a call for 100k new warehouse workers and boosted overtime pay from 1.5x to 2x. Amazon has also put many non-essential items on hold while it focuses on delivering essentials, this not only gives Amazon good PR credit as a corporate citizen but also allows it to continue to operate while other non-essential goods providers (including many competitors) are forced to close.

Other notable performers in the Fund worth mentioning are Nvidia and Twilio. Following on from the discussion of AWS and the current critical role of cloud infrastructure are Nvidia who produce state of the art GPU’s, which, alongside the products gained from the successful acquisition of previous portfolio company, Mellanox, provide the key hardware for the next generation of cloud computing data centres. Twilio provides communications API platform for software developers. Put simply if you’ve received a text/call/email from a company through and app or webpage, it was likely using 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 developers need to be able to provide this service.

We expect this nascent recovery to pick up steam in the second half of the year, although it may not be entirely smooth sailing – bouts of risk aversion triggered by renewed outbreaks of the virus remain a distinct possibility.

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








Liontrust Global Alpha C Acc












IA Flexible Investment













*Source: Financial Express, as at 30.06.20, total return (net of fees and income reinvested). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 30.06.20, 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. 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, July 16, 2020, 3:28 PM