Liontrust UK Ethical Fund

Q2 2019 review

The Fund returned 9.9% over the quarter, outperforming the IA UK All Companies sector average of 3.6% and the MSCI UK Index’s 3.3%*.


Equities enjoyed another solid period, despite a dip in May, and many indices are entering recording-breaking territory once again. As we have grown used to over recent years, this has been against macro uncertainty in the background, with tensions rising in the Middle East, the US and China continuing to argue on trade and Brexit still unresolved as the UK awaits its new Prime Minister.

Despite no actual rate activity in June, it was an interesting month on the policy front, with the Federal Reserve, European Central Bank and Bank of England all making announcements.

In the UK, the Monetary Policy Committee voted to keep rates on hold at 0.75% in June, warning that economic growth could fall to zero in the second quarter. During the period, Theresa May made a final attempt to patch together a parliamentary majority for a Brexit deal but failed to do so and announced she will stand down and pass the shambles to a successor.

At time of writing, the race for Prime Minister has come down to just two, Boris Johnson and Jeremy Hunt, and with Johnson the bookies’ favourite, odds of a hard Brexit have increased – hence the caution on rates from the Bank of England.

As ever, we follow economics and politics with interest but continue to focus on identifying businesses exposed to strong sustainability trends that will endure and grow their value per share regardless of the backdrop. 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.

Long-term holding Kingspan was our best-performing stock over the period, reporting a strong first quarter in May. Sales rose by 18% year-on-year to 1.06bn, which the group attributed to strong volumes across its key markets. This comes on the heels of a good 2018, during which the company delivered revenues of over 4bn for the first time.

Improving the efficiency of energy use is a key theme across our portfolios and we think this business is well placed to profit from increased demand for its energy efficient products. The company produces thermal insulation, which helps to cut the amount of energy needed to heat the buildings in which we live and work.

London Stock Exchange posted a solid quarter, announcing a 5% year on year rise in income for Q1 against a challenging market backdrop. The group continues to develop and invest for growth, with the acquisition of a minority stake in Euroclear and the launch of new services in post-trade and information services.

Familiar names such as Softcat feature among our top performers once again, with the share price continuing to rise after the company announced strong six-month results to end January earlier in the year. The company continues to take market share and regardless of the macroeconomic environment, small and medium-sized businesses are spending on things like IT security, GDPR compliance, and efficiency-driving software.

Learning Technologies Group has also continued to grow its share price this year after a dip in Q4 and the leader in the e-learning workplace education market has recently been recognised by the Financial Times as one of Europe’s fastest growing companies. 

A beneficiary of our Providing education theme, the company is experiencing strong organic growth from existing professional educational products, as well as consolidating the fragmented market, with a focus on innovative content and technology.

Elsewhere, Intertek was among our stronger positions, boosted by a May trading statement that revealed 7.3% year on year revenue growth over the first four months of 2019. This is one of the largest and oldest testing companies in the world with a strong and trusted brand, providing complex and thorough testing, inspection and certification services to many industries and thousands of products. The company benefits from structural growth in increasing safety standards, outsourcing, regulations and sustainability.

In terms of the stocks that detracted over the period, Crest Nicholson shares have traded downwards despite a solid set of half-year results, reporting revenue 7% higher than the same period last year. The property developer has instigated a revised strategy to cope during the current period of political uncertainty, pausing growth and de-risking its open market sales programme through increased pre-sales and partnerships.

Heading into the second half of the year, Crest highlights its encouraging forward sales and increased proportion of homes for sale at more affordable price points.

Cineworld has also struggled, reporting a slow first third of the year despite record performance in the latter weeks driven by the record-breaking Avengers: Endgame. Despite this blip, which the company said was largely down to a very strong comparative period in 2018, it remains confident in the current strategy and a strong line up of blockbusters to be released over the rest of the year, including Lion King, Frozen 2, and Star Wars: The Rise of Skywalker.

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







Liontrust UK Ethical 2 Acc












IA UK All Companies sector average













*Source: Financial Express, as at 30.06.19, primary share class, total return, net of fees and income 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, July 29, 2019, 1:00 PM