Liontrust Global Smaller Companies Fund

Q3 2020 review

The Liontrust Global Smaller Companies Fund returned 7.5% over the quarter, outperforming both the MSCI World SMID Index and the IA Global sector, which returned 2.8% and 4.2% respectively*.

 

year. Despite the resurgence in Covid-19 in some parts of the world, Western economies have started showings signs that they are on the road to recovery. Similar to the previous quarter, this has been driven by a combination of reduced uncertainty around the trajectory and effects of the Covid-19 outbreak, aforementioned early signs of solid economic recovery and continued Government and Central Bank stimulus in particular from the US Federal Reserve. US equities continued to recover from the sharp sell-off in the first quarter of the year and indeed surpassed previous highs that were seen in February before COVID-19 hit. The market continued to take solace from the supportive monetary and fiscal stimulus provided by the Federal Reserve and US government as the US economy gets back on its feet. The rally was also fuelled by the relatively contained rise in hospitalisations and fatalities despite a surge in new COVID cases in July in the Sunbelt states.

As per previous quarters, the Fund benefited from its exposure to technology stocks once again. 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.

Strong performers have included Horizon Therapeutics, the biopharma company, which has delivered strong sales from its key drugs including Teprotumumab (tepro) which treats thyroid eye disease. Furthermore, the cloud-based software service providers in the portfolio have also performed well over the quarter as they too look set to benefit from the accelerated uptake and increased scope of cloud solution in the Covid (and post Covid) economy. These include HubSpot, Pegasystems and Zendesk, all of whom provide SaaS solutions at various stages of the sales/user journey for businesses, including sales targeting, customer experience, and customer support centre services.

The outlook on equity markets appears to be steadier and more optimistic than it was even a few months ago. Plenty of risks remain, however. The underlying global economy, while recovering, remains in a difficult state, with low interest rates holding up asset prices despite poor near term prospects. COVID-19 has been at the forefront of news for most of 2020 and we expect this to continue, but we also expect that US election buzz will steal some of the limelight over the final quarter of the year.

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

 

 

Sep-20

Sep-19

Sep-18

Sep-17

Sep-16

Liontrust Global Smaller Companies C Acc GBP

31.7

-2.9

32.8

22.2

1.8

MSCI World SMID Cap

-0.9

2.8

12.7

14.5

31.9

IA Global

7.2

6.0

11.6

14.9

26.1

Quartile

1

4

1

1

4

 

*Source: FE Analytics as at 30.09.20

 

**Source: FE Analytics as at 30.09.20

 

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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.

Disclaimer

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, October 21, 2020, 8:59 AM