Liontrust Global Technology Fund

Q3 2019 review

The Liontrust Global Technology Fund returned -0.5% compared to 3.7% from the IA Technology and Telecommunications sector and 5.7% for the MSCI World Technology Index. While underperforming this quarter, the Fund continues to beat its peer group average over three years and since inception.

The third quarter saw equity markets remain relatively flat with gains frequently blunted by bad news such as escalation in the US-China trade conflict, increased likelihood of a no-deal Brexit and general signs of a slowdown in global growth

Portfolio attribution

The Fund’s top performers included Alphabet (Google), which had a phenomenal Q2 earning report that saw the stock jump, KLA Tencor, which continues to grow after the Orbotech acquisition, and Perspecta, the US IT services company, which has won a series of lucrative government contracts and saw a stellar Q2 beat and guidance raise.

Unfortunately, Q3 was a tough one for many of our previous high flying names, particularly in one of our favoured themes: cybersecurity. Companies such as Mimecast, Cyberark, and Rapid7 had disappointing Q3 performance and were some of the portfolios poorest performers due to marked rotation within the market away from high growth names to more value stocks. The fundamentals, however, have not materially changed, and we continue to back not just the overall industry but these companies within it.

Communications software, with the exception of Ringcentral, also had a tough period, with Twilio, Zendesk and 8X8 all having significantly negative returns due to similar issues surrounding valuation of high growth names. Ringcentral, however, continues to be a top performer and a convincing case of “best in class” communications software provider. We maintain a very positive outlook after a very engaging and encouraging visit to their Silicon Valley headquarters in August. Similar to cybersecurity, we continue to like the underlying fundamentals of the industry as providers of essential services to modern companies and feel we hold the companies best positioned to benefit.

Q3 saw a few portfolio changes. Exits include Baidu, Electronic Arts, Silicon Valley Bank and Tableau Software. Baidu was exited due to poor Q2 earnings results and guidance that unfortunately suggested that our initial investment thesis wasn’t panning out as expected where search usage (key to Baidu’s business model) shifted dramatically to other offerings from Chinese tech giants Tencent and Alibaba (both portfolio companies). EA and Silicon Valley bank had both been strong performers, however concern about EA’s competitive position and Silicon Valley Bank’s vulnerability, both in a souring macro environment of low yields and against rising competition from its fellow West Coast rival, First Republic Bank, led us to take profits and fund new positions. Tableau Software was “exited” as a result of an acquisition by another portfolio company, Salesforce, for a significant premium.

New additions to the portfolio include Intuit and Constellation Software. Both are very high quality companies with consistently strong ROIC (return on invested capital) and management teams that have proved to be excellent allocators of capital, either reinvesting in high yielding projects or returning cash to shareholders in an efficient manner. Intuit is a leading provider of financial management software for individuals (mostly for tax purposes) and small businesses while Constellation Software weaves together a wide range of VMS (vertical market software) companies, each with their own niche expertise in a given vertical. Both companies are great examples of the economic rewards of providing essential software services, where churn is low and adequate cash is recycled to improve and expand the product offering.


While the macro outlook remains uncertain, with many of the themes outlined in the introduction still very much in progress we continue to be very optimistic about the future returns from technology companies. Technology stocks have significantly outperformed the wider market over the past 10 years, with the best technology companies leading the way by reaping the benefits of both providing and utilising the productivity gains that technology promises. We also continue to believe that by focusing on companies with strong investment narratives, backed by robust financial metrics and attractive discounted cash flow valuations, we can continue to provide long term outperformance in this exciting sector through careful and attentive active management.

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






Liontrust Global Technology C Acc




MSCI World Information Technology Index




IA Technology & Telecomms








*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, 3:30 PM