Liontrust Macro UK Growth Fund

June 2018 review

The Liontrust Macro UK Growth Fund returned -1.2%* in June, compared with the FTSE All Share Index return of -0.2%.


With reference to UK equity indices, it’s no understatement to suggest that June was an entirely unremarkable month. Modest losses were seen across the entire market-cap gamut.

More violent market moves were witnessed elsewhere. Escalating trade war rhetoric between the US and China triggered an 8.5% mark-down in Chinese equities. The parallel threat of tariffs on US car imports was sufficient to knock the German DAX index by more than 3%.

This is germane to the portfolio. We are advocates of global reflation, or the normalisation of economic affairs, as expressed by rising central bank and ‘risk-free’ rates, in the wake of the long, post-crisis deleveraging.

Our analysis has clear implications for portfolio positioning and we have a long-established tilt to economically-sensitive value, or cyclical businesses, and a corresponding underweight to quality, or growth businesses with little gearing to the vagaries of the economic cycle.

This strategy inverts the tired status quo of the post-crisis period and argues for regime change in both investor psychology and positioning.

Talk of trade war, with all its implications for economic activity, can act as a brake on this shift. This no doubt explains comparatively weak June returns from some of the portfolio’s more explicitly cyclical, or value elements.

But the likely impact of trade wars is limited and we remain sanguine in our outlook for the global economy. Activity data in both US and China is solidly indicative of ongoing expansion. European growth has reverted to trend rates, expunging memories of an alarmingly soft Q1.

This gives us the confidence to look through June’s pullback in UK quoted miners (-2.7%) and life insurers (-4.3%) and maintain our material overweight exposure to companies of this ilk. Leave aside the highly attractive valuations and dividend characteristics common to companies in both sectors.

Notably, the June Monetary Policy Committee (MPC) meeting cemented our conviction in the direction of the economy and the prospects for the portfolio. Chief Economist Andy Haldane’s vote for an immediate rate hike signals a changing balance in MPC consensus and increases the probability that the Bank of England moves in August.

In explanation of his vote, Haldane observed: “Interest rates in the UK are currently significantly negative... UK growth continues to be steady… The unemployment rate in the UK, at 4.2%, has fallen to its lowest levels in over 40 years… (and) we have seen a steady pick-up in annual rates of wage inflation.”

We couldn’t have put it better.

With reference to stock-specific developments, bid-stock Virgin Money rose 7% and was June’s strongest performer. This follows from the combination of deal terms and investor appraisal of the transaction’s merits; the implied value of Clydesdale’s all paper offer rising on the assessment of deal cost and revenue synergies.


Data Growth constituent BT, rallied more than 6% on news CEO Gavin Patterson was to leave the business. This draws a line under Patterson’s disappointing tenure and allows investors to focus on the turnaround of a cheaply-rated business with decent prospects in consumer and enterprise convergence.


On a final matter of housekeeping, the resource component of our Infrastructure Spending theme have now been split out and designated as a separate play on Resource Scarcity. Categorically, this has no bearing on our commitment to the logic of Infrastructure Spending. Rather, it reflects the portfolio’s increased weighting to miners and realisation that, in addition to public capital works, electric vehicles and Chinese environmental policy will be important drivers of the miners’ revenue and profit growth.


Macro-Theme Allocation (as at 30.06.18):

Macro UK Growth June Review 


Macro-Theme Changes [1]:

Resource Scarcity

New positions were opened in Anglo American and First Quantum Minerals. Anglo American shares have obvious value appeal. Balance sheet risk has been addressed by a combination of asset sales, capex discipline and higher spot prices, actions with the potential to enhance shareholder returns. First Quantum Minerals’ copper exposure offers gearing to the manufacture of electric vehicles and rollout of the associated charging infrastructure. Its successful development of Cobre Panama copper mine also holds the prospect of materials earnings growth. The holding in BHP Billiton was increased. BHP is cheaply-rated and highly cash generative, while its resource mix gives it exposure to both the advent of electric vehicles and the structural infrastructure spending deficit.

Digital Economy

Pricing headwinds are tempering Direct Line’s near-term earnings trajectory, diminishing the attractions of the business for a growth portfolio and leading us to reduce the portfolio’s position.

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






Liontrust Macro UK Growth I Acc






FTSE All Share Index






IA UK All Companies













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

*Source: Financial Express, as at 30.06.2018, 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.

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. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

Investment in the Fund involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Fund’s expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation.


This content 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy.  It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. 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.

Thursday, July 12, 2018, 3:33 PM