Liontrust Global Smaller Companies Fund

Q3 2019 review

The Liontrust Global Smaller Companies Fund returned -2.1% over the quarter, meaning it underperformed relative to the IA Global sector and the MSCI World SMID Index, which returned 2.4% and 2.9%, respectively.

Market Overview

It was a volatile quarter, with macro factors dominating markets. The key issue over the quarter was the ongoing US/China trade war, which fed into concerns about a global economic growth slowdown. However, at the same time, central banks remained highly supportive, with the US Federal Reserve’s rate cuts providing a floor to equity markets. Though this initially meant bond yields continued their well-trodden downward path, fixed income markets sold off heavily in early September. There seemed to be little economic data to support these moves, with the signs suggesting many investors were simply taking profits from what had become a very crowded trade. This move in bond yields had a profound effect on equities, as there was large rotation within the market with value stocks, having considerably underperformed over the course of 2019, enjoying a sharp rally in September as global bond yields rose. As a result, high growth areas of the market (such as certain parts within the technology sector), witnessed a painful de-rating. As a result of the uncertainty surrounding Chinese growth, emerging market equities considerably underperformed relative to their developed market counterparts over the quarter.

Portfolio attribution

The Fund’s underperformance relative to the Index was driven by the sharp de-rating within the technology sector. This is evidenced by the largest detractors to the portfolio’s returns, which included the likes of Twilio, Cyberark, Mimecast and Rapid7, given high growth areas such as cybersecurity and communications software (having delivered very strong returns over recent times) bore the brunt of the market rotation towards value names. We believe the fundamentals behind cybersecurity, however, have not materially changed, and we continue to back not just the overall industry but these companies within it. Similarly, we continue to like the underlying fundamentals for the communications services industry as providers of essential services to modern companies and feel we hold the companies best positioned to benefit. The strongest contributor to returns was Trex, which rallied given improving US housing data.


Despite the ongoing uncertainty thanks to the US/China trade war, we remain relatively optimistic in our outlook for the global economy. Fears surrounding global economic growth continue to weigh on investor sentiment, but we believe fears of a recession in the US are considerably overblown and while Chinese growth is slowing, we believe the authorities have a huge amount of tools at their disposal (both in terms of monetary and fiscal policies) to offset the impact of US tariffs. We therefore believe the macroeconomic backdrop remains supportive, particularly within emerging markets where valuations remain low economic growth continues to improve. Given the more dovish rhetoric from the US Federal Reserve, low inflation and increasing technological disruption across the market, we struggle to see how the recent rally in classic value stocks can be continue and therefore maintain our focus on high quality companies that can deliver sustainable growth. 

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








Liontrust Global Smaller Companies C Acc






MSCI World SMID Index






IA Global












*Source: Morningstar as at 30.09.2019, on 17.10.2019.

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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.

Tuesday, October 22, 2019, 3:19 PM