Liontrust SF Managed Fund

Q4 2018 review

The fund returned -8.4% over the quarter, slightly lagging the IA Mixed Investment 40-85% Shares sector average of -7.9%*.

Sentiment remained fragile through the period, with Red October the latest in a long line of market declines in that particular month. Hints the Federal Reserve may soften its interest rate stance and a three-month trade ceasefire between the US and China eased concerns to some extent but hopes for the traditional year-end rally ended in disappointment and most indices around the world posted negative figures for 2018 as a whole.

We continue to stress that while these issues dominate the news, underlying business fundamentals for the areas of the global market in which we invest remain strong. Important structural dynamics, such as the shift to a digital economy, the drive to improve efficiency and the importance of improving quality of life, also continue to drive earnings.

Asset allocation was flat over the quarter, with our underweight government bonds position a negative contributor, but offset by our overweight cash position. We remain neutrally weighted on equities and overweight corporate bonds.

In a difficult period, American Tower was the fund’s best performer, continuing to see demand for wireless telecommunication capacity in the US, as well as Brazil and India. In the modern digital economy, customers demand greater and greater connectivity on mobile devices.

American Tower is a beneficiary of our theme of Connecting People: this demand is secular, not cyclical, and it performed well in difficult market conditions.

Our stronger positions included two pharmaceutical names in the shape of Roche and Eli Lilly. Roche continues to show progress with both its recent launches and pipeline. Thematically, Ocrevus in MS and Hemlibra in Hemophilia have both seen good uptake since launch, demonstrating that true innovation will be quickly taken up by patients and healthcare payers. As such, Roche is a key beneficiary of our Enabling Innovation in healthcare theme and reinforcing that, the company has the highest number of Breakthrough Therapy designations in the industry. Such progress continues to help alleviate market concerns about pressure from potential biosimilar erosion to its core oncology franchises

Eli Lilly, meanwhile, remains the highest growth large pharma company in the industry, achieving this through new innovation in areas such as diabetes and inflammation. During the quarter, the company held an analyst day, providing better than expected 2019 and 2020 sales guidance.

In terms of weaker names, Alexion suffered as rival firms presented data in competition to its main drug franchise Soliris. This took place at the American Society of Hematology and while very early stage, we believe some investors saw potential for these to undermine Alexion’s dominance in this space.

We believe Alexion will continue to remain a market leader, reinforced by the approval of its next generation therapy Ultomiris for the treatment of PNH ahead of schedule. Ultimately, we believe the company will successfully migrate the bulk of its current Soliris patients onto this therapy and it will become the new standard of care.  

Elsewhere, Prudential has been a poor performer throughout the year and we suspect the shares have been dragged down due to concerns over a slowdown in China, likely exacerbated by the ongoing trade war with the US. The underlying business, however, continues to perform well and one of the key attractions for us is that Prudential is providing insurance to people who have never had it in countries where there is less state support.

Over the coming years, we expect the increase in book value to more than compensate for the more recent fall in multiple and also believe there is considerable re-rating opportunity should macro concerns in Asia dissipate

Hella was another poor performer and the auto sector in general has suffered on the back of concerns around demand, as the economic cycle slows, and tariffs. Hella’s biggest customers are the large German automakers, who look set to suffer from tariffs imposed by the US government.

We still see Hella’s products as important in the secular shift in the auto industry, as the global automotive fleet become more efficient and safer. Improving Auto safety is an important theme across our portfolios and Hella remains a clear beneficiary of this trend. While a cyclical slowdown will affect demand in 2019, the structural trend will drive sales beyond this, and as long-term investors, we see Hella as a best in class investment in the auto sector

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








Liontrust Sustainable Future Managed 2 Inc






IA Mixed Investment 40-85% Shares













*Source: Financial Express, as at 31.12.18, 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 majority of the Liontrust Sustainable Future Funds have holdings which are denominated in currencies other than Sterling and may be affected by movements in exchange rates. Some of these funds invest in emerging markets which may involve a higher element of risk due to less well regulated markets and political and economic instability. Consequently the value of an investment may rise or fall in line with the exchange rates. Liontrust UK Ethical Fund, Liontrust SF European Growth Fund and Liontrust SF UK Growth Fund invest geographically in a narrow range and has a concentrated portfolio of securities, there is an increased risk of volatility which may result in frequent rises and falls in the Fund’s share price. Liontrust SF Managed Fund, Liontrust SF Corporate Bond Fund, Liontrust SF Cautious Managed Fund, Liontrust SF Defensive Managed Fund and Liontrust Monthly Income Bond Fund invest in bonds and other fixed-interest securities - fluctuations in interest rates are likely to affect the value of these financial instruments. If long-term interest rates rise, the value of your shares is likely to fall. If you need to access your money quickly it is possible that, in difficult market conditions, it could be hard to sell holdings in corporate bond funds. This is because there is low trading activity in the markets for many of the bonds held by these funds. Mentioned above five funds can also invest in derivatives. Derivatives are used to protect against currencies, credit and interests rates move or for investment purposes. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions.




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, February 4, 2019, 1:59 PM