Liontrust Special Situations Fund

December 2020 review

The Liontrust Special Situations Fund returned 3.6%* in December. The FTSE All-Share Index comparator benchmark returned 3.9% and the average return in the IA UK All Companies sector, also a comparator benchmark, was 4.5%.


December was bookended by UK approvals for Covid-19 vaccines: first the Pfizer/BioNTech vaccine on the 2nd, followed by the Oxford/AstraZeneca version on the 30th.


Positive sentiment over the roll-out of vaccines in 2021 and a return to economic and societal normality allowed markets to add to November’s sharp gains, despite the emergence of a new strain of coronavirus which was spreading rapidly in the UK – leading to lockdown measures being tightened at Christmas rather than relaxed as planned.


The mood among UK investors may also have been boosted by the last-minute agreement of a trade deal between the UK and EU ahead of the transition period ending on 31 December. Whatever the merits (or otherwise) of the deal, the removal of some uncertainty will have been welcomed by most.


While AstraZeneca’s (-6.2%) name was in the headlines for good reasons due to UK approval of its vaccine for emergency supply, shares in the company had slipped earlier in the month on news of a large deal to acquire Alexion Pharmaceuticals. The US$39bn cash-and-shares acquisition will grow AstraZeneca’s immunology business by adding Alexion’s portfolio of treatments for rare diseases.


Shares in IMImobile (+48%) jumped after it recommended a 595p a share takeover offer from Cisco. IMImobile is a cloud software provider whose products help companies communicate more effectively with customers via mobile and digital channels. US tech giant Cisco is a specialist in enterprise networking and believes the purchase of IMImobile will significantly enhance its ability to deliver a “Customer Experience as a Service” to customer-facing businesses.


We own IMIMobile as it possesses all three key intangible assets our investment process looks for: IP within its software, an embedded distribution network within its very sticky customer base, and also 90% recurring revenue thanks to the company’s software-as-a-service (SaaS) charging model.


Takeovers of holdings have historically been a consistent feature for the Economic Advantage funds. The intangible assets the investment process looks for in companies have frequently proven attractive to corporate acquirers because they are so hard to replicate organically.


A few months ago we noted that a number of our companies – particularly the smaller ones – were finding opportunities to invest in growth or acquisitions as a result of the rapid economic changes that have been catalysed by the pandemic. In December, a number of our stocks were involved in corporate activity in pursuit of growth opportunities.


One of these was Ideagen (+32%), a supplier of integrated risk management tools to highly regulated industries. In December, it announced a share placing to raise £49m to support a number of attractive acquisition opportunities it has recently identified. It acted swiftly on the first of these, announcing the £28m purchase of Huddle, a Software-as-a-Service workflow specialist for highly regulated sectors such as accountancy and the public sector.


Last year, Keywords Studios (+25%), raised £100 million to support acquisitions. The company, which provides support services such as artwork and localisation services (e.g. translation) to video games publishers, has a strong record of profitable growth via acquisitions, having completed more than 40 over the years. It announced several in December: the (up to) US$50m purchase of High Voltage, a US-based AAA game developer, as well as the smaller additions of Indigo Pearl and Jinglebell Communications for considerations of up to £2m and around €1.8m respectively.


Digital training provider Learning Technologies Group (+32%) was another looking to expand via acquisition. It bought eThink Education for an initial cash consideration of US$20m. The deal follows the September 2020 purchase of eCreators and is consistent with its strategy to consolidate the market for Moodle-based learning management systems.


Elsewhere in the portfolio’s top contributors, Weir Group (+19%) moved higher. During the month it announced a £95m order to supply aftermarket components and services to a mine in Western Australia.


Among the portfolio’s detractors, both Iomart (-5.7%) and RWS Holdings (-4.8%) released financial results but neither gave us any cause for concern. Within its full-year results for the period to 30 September 2020, RWS Holdings commented that the new financial year has started well and is slightly ahead of its expectations.   Although Iomart’s interims (to 30 September 2020) reported a small decline in organic revenues due to the impact of Covid-19 on discretionary projects, they also showed a three percentage point improvement in recurring revenues to 90%. The cloud computing company also commented that new business discussions have increased in recent months, indicating a potential return of confidence in IT project spending.


Positive contributors included:

IMImobile (+48%), Learning Technologies Group (+32%), Ideagen (+32%), Keywords Studios (+25%) and Weir Group (+19%).


Negative contributors included:

Globaldata (-9.0%), AstraZeneca (-6.2%), Iomart Group (-5.7%), RWS Holdings (-4.8%) and Unilever (-3.9%).


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








Liontrust Special Situations I Inc






FTSE All Share






IA UK All Companies













*Source: Financial Express, as at 31.12.20, total return (net of fees and income reinvested), bid-to-bid, institutional class. Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 31.12.20, 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. Some of the Funds managed by the Economic Advantage team invest primarily in smaller companies and companies traded on the Alternative Investment Market.  These stocks may be less liquid and the price swings greater than those in, for example, larger companies. The performance of the GF UK Growth Fund may differ from the performance of the UK Growth Fund and will 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.

Thursday, January 14, 2021, 5:41 PM