Liontrust UK Growth Fund

September 2020 review

The Liontrust UK Growth Fund returned -1.6%* in September. The FTSE All-Share Index comparator benchmark returned -1.7% and the average return in the IA UK All Companies sector, also a comparator benchmark, was -1.8%.

 

While the first half of 2020 included a spike in volatility as the stockmarket suffered a correction before staging a partial recovery, the third quarter saw much more subdued conditions as investors became used to monitoring the path of the pandemic and assessing the economic costs as well as the various policy responses.

 

In September, there was gathering evidence of an uptick in Covid-19 infections towards a second wave in developed economies, while the US Federal Reserve gave further details of its latest ultra-dovish move: to adopt a flexible approach to inflation that allows it to run above 2% for some time without raising interest rates. But there was nothing to shift the prevailing mood decidedly into more bullish or fearful territory.

 

Most of the Fund’s largest contributors September didn’t issue any significant updates to investors. Renishaw’s (+17%) strong return coincided with its addition to the FTSE 100 reserve list. Were it to be promoted to the large-cap index, it would provide another illustration of the substantial growth of a stock we have held in the Economic Advantage range of Funds for over 20 years. Shares in Domino’s Pizza Group (+8.8%) continued to rally following August’s interim results, which showed the extent to online sales growth is accelerating in the current environment.

 

It was a similar story among the biggest detractors. There was, however, news from TP ICAP (-25%), whose announcement of a US$600m to US$700m potential acquisition of equities ‘dark trading’ specialist Liquidnet prompted some investor unease late in the month.

 

UK supermarkets have been one of the strongest areas of the stockmarket in 2020 as the combination of consumer staples and home delivery has led to fairly pandemic-proof demand. The FTSE All-Share Food & Drug Retailers Index was up 2.3% for the year heading into September, compared to the wider index’s 19% loss. So sales expectations were set pretty high for Morrison Supermarkets (-10%) interims, and the shares slipped despite reporting ex-fuel like-for-like growth of 8.7% year-on-year. Fuel demand plummeted during lockdown, causing total revenues to fall 1% to £8.7bn. Pre-tax profit also fell, down 25% to £148m, due to in large part the costs of hiring new staff to meet online demand.

 

Paypoint (-20%) was also among the Fund’s weaker holdings, falling heavily late in the month after the energy regulator Ofgem issued a statement suggesting Paypoint may have abused a dominant position in the over-the-counter market for pre-paid energy customers. The regulator’s provisional findings included objections to Paypoint’s practice of including exclusivity clauses in its contracts with energy suppliers and retailers, limiting the prospects for competitors.

 

Positive contributors included:

Renishaw (+17%), British American Tobacco (+9.7%), Domino’s Pizza Group (+8.8%), Intertek Group (+8.4%) and Spirax-Sarco Engineering (+8.0%).

 

Negative contributors included:

Petrofac (-31%), TP ICAP (-25%), Aggreko (-22%), WH Smith (-19%) and BP (-15%).

 

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

 

 

Sep-20

Sep-19

Sep-18

Sep-17

Sep-16

Liontrust UK Growth I Inc

-11.0

3.0

9.4

11.5

25.7

FTSE All Share

-16.6

2.7

5.9

11.9

16.8

IA UK All Companies

-12.8

0.0

5.5

13.6

11.7

Quartile

2

2

1

3

1

 

*Source: Financial Express, as at 30.09.20, 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 30.09.20, 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.

Disclaimer

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.

Friday, October 9, 2020, 2:48 PM