Liontrust Macro UK Growth Fund

November 2018 review

The Liontrust Macro UK Growth Fund returned -1.3%* in November, compared with the FTSE All Share Index return of -1.6%.


Portfolio returns were impacted by weakness amongst the paper and packaging businesses of our Digital Economy theme. DS Smith (-15.0%) and Smurfit Kappa (-17.2%) extended Q4 declines as markets priced overcapacity in the container board market. Both businesses have updated investors in recent weeks and it should be noted that operational positives and upbeat guidance bear no correspondence to the severity of any share price correction. We are holders.

UK mid-cap bank CYBG (-23.7%) exerted a further drag on performance. A broadly in-line full year statement was tarnished by soft guidance on 2019 margins and the share price weakened. This was no doubt exacerbated by the stock overhang which persists from CYBG’s all-paper acquisition of Virgin Money and the Brexit-related pessimism that continues to envelope UK-centric, cyclical businesses. For our part, CYBG’s modest rating fails to reflect the synergies yet to accrue from its acquisition of Virgin, nor the fact that the deal has forged a balanced business with the wherewithal to take on the incumbents.

November returns were also tempered by weakness amongst the large-cap miners of our Scarce Resource theme. This was less a consequence of adverse, company specific news flow; and much more the product of general risk sentiment. Trade war anxieties and the assumed impact on global growth, continue to pressure share prices. But the thematic case for higher spot prices remains intact and our miners are characterized by eye-catching valuations, strong cash-generation and attractive shareholder returns. This remains a conviction position.

November did not lack positives. Anglo-Pacific (+9.6%) a small-cap mining royalties business which bucked the trend to weakness amongst UK-listed resource businesses. Share price gains came in the wake of a late October Q3 update and supportive broker commentary, both attesting to the company’s cash generative qualities and strategic exposure to commodities characterized by attractive market fundamentals.

November returns were further boosted by our overweight in publisher and Digital Economy constituent, Bloomsbury Publishing (+8.0%). Whilst the month lacked any catalyst adequate to account for share price rise, investor enthusiasm no doubt followed October’s healthy interims. A 22% increase in adult fiction and cookery titles contributed to 13% earnings per share growth.

Vodafone’s (+17.5%) resurgence offered a further contribution to Fund performance. Share price strength was driven by a November interim statement which, whilst unremarkable in absolute terms, did enough to exceed rock-bottom expectations. CEO Nick Read gave bullish appraisal of Vodafone’s key European market, raised free cash flow guidance and – most critically – maintained the current level of dividend disbursements. This frustrated bearish assumptions of a dividend cut and triggered a material correction of year-to-date share price weakness. Vodafone is cheap relative to its peer group and the market and we maintain that the discount will narrow as attention shifts to the obvious strength of its European portfolio.

From a sectoral perspective, our pharmaceutical overweight proved beneficial in November. Lacking any obvious, discrete reason for pharma’s outperformance, it seems fair to surmise that this was just an extension of the appetite for defensives stoked by October’s market violence. Gains for telecoms, distillers and personal goods business, offered support to this view.

Macro-Theme Allocation (as at 30.11.18):

Macro UK Growth November 2018 Theme Allocation. 

Macro-Theme Changes [1]:

Data Growth

The position in Verizon was tactically reduced as strong H2 share price performance presented a profit capture opportunity as part of a broader reduction in portfolio exposure to non-sterling assets;


Infrastructure Spending

We also reduced Tag Immobilien and Vonovia in another tactical portfolio management decision reflecting our profit-capture discipline and strategic call to reduce non-sterling exposure.


Rising Rates

A new position was initiated in Barclays, a cheaply-rated bank trading at a material discount to book value which should be a beneficiary of higher rates. It has a high-return UK retail business, while activist presence raises the likelihood of shareholder friendly outcomes. The holding in Prudential Financial was sold, consistent with the wider strategic effort to reduce non-sterling exposure.


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 30.11.2018, total return (net of fees and income reinvested), bid-to-bid, institutional class.

**Source: Financial Express, as at 30.09.2018, 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. Investment in Funds managed by the Macro Thematic team 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. The performance of the Liontrust GF Macro Equity Income Fund may differ from the performance of the Liontrust Macro Equity Income Fund and is likely to be lower than its corresponding Master Fund due to additional fees and expenses.


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.

Monday, December 10, 2018, 4:33 PM