Liontrust Macro UK Growth Fund

August 2018 review

The Liontrust Macro UK Growth Fund returned -0.3%* in August, compared with the FTSE All Share Index return of -2.8%.


On the Beach, an online travel agent and Digital Economy holding, led portfolio gains in rising 19%. Investor enthusiasm was stoked by a mid-month trading update that brought news of in-line trading and the £20m, bolt-on acquisition of a B2B vendor of luxury package holidays. Critically, news of current trading was a welcome tonic to the bearish sentiment that has held sway since March’s muted interims.


Hastings, a fellow Digital Economy constituent, also featured amongst August’s strongest performers. The non-life insurer rose more than 8%, bucking a period of weakness that stems from March’s modestly disappointing Q4 update. In Hastings, we have an example of how market inefficiency can create opportunity. The market has de-rated this business on the assumption it has gone ex-growth. We view matters differently, reading a more prudent, margin-centric growth strategy in recent trading updates. August feels like a watershed.


Anglo Pacific, a mining royalties business and Scarce Resource holding, was another notable gainer. August’s 12% share price rise followed news that the company had acquired a new mining royalty, paying £38m for a stake in a tier one Canadian iron ore asset. The deal offers immediate earnings accretion and diversity, secures long-life cash flows and plays to China’s new found environmentalism and the related appetite for high grade iron ore. Little wonder investors were enthused.


August was less kind to the other mining constituents of the Scarce Resource theme. The FTSE 350 Mining Index declined 9% as trade war anxieties and emerging markets concerns weighed on cyclical businesses. This is disappointing, but does nothing to detract from the sector’s cash-generative attributes, balance sheet strength and eye-catching valuations. Fundamentals will out.


Happily, geopolitical angst excited little enthusiasm for the reputed safety of UK ‘bond-proxy’ equities. Given the portfolio’s nil-weighting, weakness in beverage stocks, food producers and tobacco companies delivered a significant fillip to performance relative to the index.  Notably, the decline in tobacco stocks extends a de-rating that has been in train for more than a year and offers ample vindication of the bear case outlined in our recent blog: No smoke without fire?


Market unease seemed of more benefit, however, to the German real estate contingent of our Infrastructure Spending theme. Initiated in light of the supply/demand imbalance that defines Germany’s residential real estate market, our German property holdings are inversely correlated with bond yields; a relationship stemming from bond-like cash flows and the leverage underpinning property portfolios. August’s market disquiet produced an appetite for benchmark bonds, a mechanical decline in yields and a corresponding demand for German real estate shares. Mid-cap Tag Immobilien, was conspicuous in returning 9.5%.


Macro-Theme Allocation (as at 31.08.18):

Macro UK Growth Theme Allocation  


Macro-Theme Changes [1]:

Rising Rates

We took profits on River and Mercantile, a position held since the company’s IPO. The combination of an FCA investigation into fund manager conduct, a CMA enquiry into pension consultancy practice and the failure to broaden the equities business are suggestive of tough operating conditions and management’s inability to address this.

Scarce Resource

Antofagasta was sold as part of a broader review of the Scarce Resource theme. A soft interim update in August triggered concerns that the company will fail to meet its own full year guidance. The shares trade at a material premium to diversified miners BHP Billiton and Rio Tinto, which counsels risk mitigation.

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







Liontrust Macro UK Growth I Acc






FTSE All Share Index






IA UK All Companies













*Source: Financial Express, as at 31.08.2018, total return (net of fees and income reinvested), bid-to-bid, institutional class.

**Source: Financial Express, as at 30.06.2018, total return (net of fees and income reinvested), bid-to-bid, primary class.

[1] The omission of a Macro-Theme expresses the absence of notable portfolio activity.

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

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 Fixed Income team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The value of fixed income securities will fall if the issuer is unable to repay its debt or has its credit rating reduced. Generally, the higher the perceived credit risk of the issuer, the higher the rate of interest. Bond markets may be subject to reduced liquidity. The Funds may invest in emerging markets/soft currencies and in financial derivative instruments, both of which may have the effect of increasing volatility.


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, September 11, 2018, 4:55 PM