Liontrust UK Mid Cap Fund

H1 2020 review

The Liontrust UK Mid Cap Fund returned -26.9% over the first half of the year. By comparison, the FTSE All-Share and FTSE 250 (excluding investment trusts) indices returned -17.5% and -25.0% respectively, while IA UK All Companies sector average return was -17.7%*.


Returns over the period were overwhelmingly driven by fears around the coronavirus pandemic. Whilst global stockmarkets bounced sharply after the very poor first quarter, driven by receding fears over the coronavirus pandemic and massive government stimulus, fears clearly remain of a structural shift in the global economy away from features such as globalisation and urbanisation. Time will tell whether these fears are justified.  However, the pandemic has clearly revealed a worrying lack of global multilateralism. Tensions between the West and China have continued to rise, as have tensions between the US and Europe. On the positive side, there have been some early signs for optimism around the multilateral approach within Europe as the need for fiscal stimulus has been apparent even to Germany which has tended to be cautious on this front, historically. On a market cap basis, large companies outperformed smaller companies and sectors such as technology were extremely strong.

Investor sentiment has continued to be very negative towards lowly-valued, smaller-cap, UK stocks.  Mega-cap technology stocks have continued to perform extremely strongly in the US, despite rising regulatory risk. Recent volatility isn’t necessarily to be feared by valuation-conscious long-term investors – especially when it brings about low absolute and relative valuations as, I believe, is currently the case. Nonetheless, we remain vigilant regarding the potential for corporate margin pressure to build in coming years – whether in the form of increased wages, taxation or financing costs.

Strongest relative performance over the half year came from Bodycote (industrial engineering) and Jupiter Fund Management (asset management). Our purchase of Bodycote on weakness was well-timed and the company is positioned well to expand its market and take market share once the recovery from the pandemic begins: many of its competitors are struggling and its cost-conscious customers are more likely to outsource to Bodycote in the future. We are excited about its future prospects. Jupiter has struggled in recent years with manager departures but this has partially de-risked the business, in fact, and it remains a key, undervalued, player within the growing UK asset management market.

Weakest performance came from Senior (industrial engineering) and RHI Magnesita (steel consumables).  Senior’s market in aerospace supply has clearly been heavily impacted by travel restrictions: demand for new aircraft in the short-medium term will be heavily constrained by the pandemic.  However management have responded proactively, the company has world-leading technology in its niches and I believe that growth in passenger air miles will continue once the pandemic abates.  Likewise, RHI Magnesita has been hit by the lack of demand for steel but it is taking market share from distressed competitors and steel will be a key staple of the global economy for many years to come – especially if fiscal stimulus is enacted and infrastructure projects are ramped up.

We remain confident in the prospects for selective UK companies, particularly in the mid- and small-cap arena.  This is primarily due to attractive company-specific valuations but also as a result of the potential for further M&A activity. The Fund continues to make use of its ability to invest throughout the market cap spectrum.  As discussed above, I am even more excited than usual by current opportunities for outperformance in selective UK companies.

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








Liontrust UK Mid Cap C Acc GBP






FTSE 250 (ex ITs) Index






IA UK All Companies













*Source: Financial Express, as at 30.06.20, total return (net of fees and income reinvested). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 30.06.20, total return (net of fees and income reinvested), primary class.


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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. Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.


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, July 16, 2020, 3:28 PM