Liontrust Global Smaller Companies Fund

Q4 2019 review

The Liontrust Global Smaller Companies Fund returned 3.4%* over the quarter, meaning it outperformed both the MSCI World SMID index and the IA Global sector, which returned 1.2% and 1.9% respectively.

 

Market Overview


Global equities enjoyed a strong quarter as recessionary fears subsided. The main driver behind this was an easing in trade tensions between the US and China, with a phase one trade deal between the two countries agreed towards the end of the quarter. As a result, global bond yields generally rose over the quarter. However, despite this improvement in investor sentiment, value stocks (having rebounded strongly in late Q3 2019), once again underperformed relative to growth stocks. Technology once again led global equities at a sector level, with healthcare stocks also delivering strong gains. The UK market was one of the strongest performing developed markets, largely driven by the general election result. Not only did the unexpectedly large Conservative Party majority end fears of a Corbyn-led Labour government, given the Tories’ more business-friendly policies, but it also created further certainty regarding the UK’s future relationship with the EU. However, the improved sentiment towards global growth also meant emerging markets outperformed developed markets over the quarter.

 

Portfolio Attribution


The Fund’s outperformance over the quarter was predominately driven by its technology exposure. The sector had come under pressure in late Q3 as bond yields spiked, sparking a rather large rotation within the global equity market from growth to value. Many of our tech stocks were hit by the indiscriminate selling, and therefore much of the strong returns seen during the quarter can be viewed as mean reversion. These included Nvidia, which rallied thanks to a general improvement in sentiment towards semiconductors, but also the fact that it has created sustainable growth by creating and becoming the top brand in the GPU (graphics processing unit) category. Another strong contributor was GB Group, the AIM-listed identity management, location intelligence and fraud-prevention company. The stock posted strong earnings over the quarter, with growth having been significantly boosted by its recent acquisitions of Vix Verify and Idology.

 

The largest detractors were certain high growth names that were hit hard during the first half of the quarter as investors took profits as a result of the sharp rebound in value. One such name was FeverTree Drinks. Our thesis has, and continues to be, that following its very strong growth in the UK, it would enjoy similar success in the North American market. While we remain confident in the company’s ability to replicate its growth strategy in the US, a lack of corporate news meant the relatively highly-valued stock came under pressure as investors pivoted more towards value stocks.

 

Outlook


We remain positive in our outlook for global markets. In our view, many of the headwinds that hurt equities in 2018 – such as slowing economic growth and trade war concerns – have receded. Global central banks were ahead of the curve with regards to decelerating growth and we believe the lagged impact of looser monetary policy will mean – barring an external shock – global growth will be 3.5% for 2020. We are therefore confident in our portfolio positioning as we believe this is a supportive backdrop for equities.

 

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

 

 

Dec-19

Dec-18

Dec-17

Dec-16

Dec-15

Liontrust Global Smaller Companies C Acc GBP

20.1

2.2

25.0

2.8

6.4

MSCI World SMID Cap

21.9

-8.2

12.4

31.1

5.4

IA Global

21.9

-5.7

14.0

23.3

2.8

Quartile

3

1

1

4

2

 

*Source: Financial Express, as at 31.12.2019, total return (net of fees and income reinvested)

 

**Source: Financial Express, as at 31.12.2019, total return (net of fees and income reinvested)

 

For a comprehensive list of common financial words and terms, see our glossary here.

  

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.

Friday, January 24, 2020, 9:32 AM