Liontrust SF Cautious Managed Fund

Q1 2018 review

The Fund returned -3.3% over the quarter, outperforming the IA Mixed Investment 40-85% Shares sector average of -4.2%*.

We started the period overweight credit and underweight Gilts, with neutral positions in equities and cash after reducing our overweight equity position in December.

Over the quarter, we twice added to equities from cash and finished March overweight equities and credit and underweight cash and Gilts. Asset Allocation was marginally negative over the period as Gilts were the best-performing asset class and risk assets performed poorly overall in a weak market.

After two strong years of equity market performance, 2018 has thus far proven to be a tricky year for investors. Growth remains strong but rising inflation and fears we are beginning to move through the final part of this cycle have led to widespread selloffs. Fears of regulation in the technology sector and an imminent US-China trade war have also raised investor concern in 2018.

Economic momentum globally has remained strong but investors have fretted this is beginning to slow. Inflation continues to rise, which is good for equity markets initially, but becomes a headwind as central banks raise interest rates more rapidly. The recovery from the deep economic hole created by the global financial crisis has been long and slow but we are finally moving towards the final stages. The US economy is clearly further into recovery than Europe, and there still is little of the economic excess that tends to precede recessions, even in America.

Overall economic momentum remains strong and we believe a trade war between China and the US is not in either country’s interest. With no recession imminent in the US, we still see economic fundamentals as supportive for risk assets.

Our process targets businesses that can grow structurally, driven by the shift towards a global economy that is more efficient, provides a higher quality of life and is more resilient.

In terms of individual stock drivers, SS&C Technologies, the global leader in software and outsourcing in the fund administration space, was among our strongest performers. Its products provide a safe and secure administrative hub for asset management companies, enabling them to concentrate on investing while ensuring they have the best technology related to back office compliance and administration.

SS&C continues to expand its business verticals via M&A activity, and its recent acquisition of DST allows the business to grow into traditional mutual funds, complementing its strength in alternative asset managers. SS&C is the clear market leader and continues to deliver on its strategy to consolidate a fragmented market and bring best in class technologies to the asset management industry. Its products ensure a more resilient investment industry, which is key to ensuring clients’ capital is safeguarded.

ThermoFisher Scientific was another strong contributor over the period, with the business delivering its strongest results in many years as growth in its suite of Life science technologies accelerated over the final part of 2017. The company saw strength across all its end markets, including a pick-up in industrial and academic sectors, combined with strong growth from China.

ThermoFisher’s products are the backbone of innovation in important areas such as healthcare and biotechnology. Innovation here helps towards a better quality of life, by providing life-saving medicines and ensuring food and air quality is monitored and improved. As global growth has improved, investment has been deployed into these key areas of growth, benefiting companies operating in this part of the market.

Softcat also made a substantial contribution to returns for the second quarter running. One of the leading value-added software resellers in the UK, the company outperformed the benchmark by a huge 39% over the first quarter alone.  

We wrote previously that we suspected Softcat was potentially positively impacted by Brexit, as customers may have brought forward big purchases before IT vendors hiked prices to counteract weaker sterling. The long-term thesis on Softcat remains in place, namely that a relentless focus on both customer and employee satisfaction results in a distinctive organisational culture that will continue to drive strong sales and profitability growth.

Abcam also featured among our best holdings over the quarter, with the shares outperforming the benchmark by 25%. Abcam is the leader in providing research grade antibodies, which are used by scientists in their work to further our knowledge of how the human body works and how to fix it when it doesn’t.

We have invested in the company as part of our theme of Enabling innovation within the healthcare system. Of particular interest to us is the company’s continued focus on product quality. There is a huge need in research to ensure robust and repeatable results when conducting scientific experiments.

 

 

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

 

 

Mar-18

Mar-17

Mar-15

Liontrust Sustainable Future Cautious Managed 2 Inc

4.7

15.8

-1.2

IA Mixed Investment 40-85% Shares

1.5

17.1

-2.9

Quartile

1

4

2


Discrete data is not available for five full 12 month periods due to the launch date of the portfolio.

 

*Source: Financial Express, as at 31.03.18, primary share class, total return, net of fees and income & interest 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. 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.

Disclaimer

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.

Tuesday, April 24, 2018, 4:00 PM