Liontrust UK Mid Cap Fund

Q3 2020 review

The manager of the Fund changed from Mark Martin to Anthony Cross and Julian Fosh on 19 August. Liontrust is proposing to merge the Fund with the Liontrust UK Growth Fund, which will be subject to investor and regulatory approval.

The Liontrust UK Mid Cap Fund returned 1.1%* over the third quarter of the year, versus the FTSE 250 ex-IT’s 1.3% return. The IA UK All companies sector returned -1.1% for the period under review.*^

While the first half of 2020 included a spike in volatility as the stockmarket suffered a correction before staging a partial recovery, Q3 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.


ONS data statistically confirmed what was already common knowledge: the UK has suffered its largest recession on record. Q2’s 20% contraction added to the 2.2% decline in Q1 to meet the technical parameters of a recession, i.e. two or more consecutive quarters of negative growth. The Bank of England is now forecasting the economy to shrink by 9.5% in 2020, less than its prior forecast of a 14% contraction. Counteracting this forecast of a shallower fall is a prediction of a slower recovery in 2021 and 2022 – of 9% and 3.5% respectively rather than 15% and 3%. However, economic forecasting is notoriously tricky, let alone under such unique circumstances, and the Bank’s underlying assumptions of no second wave of coronavirus and a smooth transition to an EU trade agreement by the start of 2021 shows how hard it is to attach much value to such estimates.


There were variable returns to different market capitalisation segments of the market: the large-cap FTSE 100 lost 4.0% over the quarter while the primarily small-cap FTSE AIM All Share index rose 8.8%. The FTSE 250 mid-cap index split the two with 1.8% return.


The Fund performed in line with its benchmark index over the quarter. Generally, the Fund’s relative returns were driven by stock selection, rather than asset allocation. However, the Fund did benefit from its 0% exposure to real estate and underweight to consumer discretionary, two sectors which underperformed as a result of the impact the second wave may have on the UK consumer as well as general concerns surrounding the health of the UK economy.


On a stock specific level, the Fund’s stock selection within consumer staples was highly additive. This was due to the strong performance of Devro, the sausage skin producer which is one of the Fund’s largest holdings, returned more than 25% over the quarter as the company posted better than expected half year results, which included continued cost savings, operational improvements and the fact all the company’s sites operated throughout the global pandemic.


On the other hand, the Fund’s stock selection within industrials (a key overweight) was the largest detractor. The likes of Senior, Ricardo and Essentra all underperformed over the quarter as the market once again became concerned about the impact of the COVID-19 crisis, and the subsequent response to it from governments around the world, would have on the economic activity.


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








Liontrust UK Mid Cap C Acc GBP






FTSE 250 (ex ITs) Index






IA UK All Companies













*Source: FE Analytics as at 30.09.20


**Source: FE Analytics as at 30.09.20


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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.

Wednesday, October 21, 2020, 8:59 AM