Liontrust US Opportunities Fund

Q3 2019 review

In the third quarter of 2019, the Liontrust US Opportunities Fund rose by 3.3%, versus the S&P 500 Index’s return of 5.0% and the IA North America peer group average return of 3.5%.


Portfolio attribution


Performance in the quarter was helped by some strong stockpicking in particularly the healthcare and financials sectors. Healthcare was the weakest sector in the market due to Elizabeth Warren, one of the Democrat presidential candidates, rising in the polls once again sparking fears over “Medicare for All” and the subsequent impact on the sector. However, within our holdings, Horizon Therapeutics performed well, producing strong second quarter results. Within financials, our bias towards non-bank sub sectors including the exchanges and rating agencies was beneficial in the face of further bond yield compression. 10 year yields fell further this quarter due to continued deterioration in global economic momentum and another interest rate cut from the Fed.


The biggest drag on performance came from our technology exposure. Some of these companies were caught up in the rotation from growth to value that occurred intra-quarter. When bond yields bottomed at the end of August the market sharply rotated away from higher growth areas of the market. Our holdings that were caught up in this rotation included Twilio and 8x8, both of which have been strong performers so far this year. Whilst one does need to keep a clear eye on valuations, we suspect these disruptor companies to continue to benefit from the digital disruption theme which is driving a wide stake between the haves and have nots. The disrupters and their embracers are growing at the expense of the disrupted. This disruption dynamic is at the forefront of our minds in this Fund.




We are concerned over what investors may be relying on as ‘safe assets’ ‒ especially in the consumer staples space – that are anything but. Low growth, high leverage and changing consumer preferences do not suggest ‘defensive assets’ in our view. Many of the companies that fall into this bracket have outperformed their fundamentals year to date, in our view, benefiting from the Fed’s so-called dovish pivot, marking an about turn in monetary policy, which has led to the sharp fall in the 10-year bond yield.


We instead manage the Fund using a clear process which emphasises research at the company level. We do not take large sector or factor bets, but we do take meaningful positions (up to ~5% of the Fund) in companies and management teams in which we believe for the long run. The portfolio is fairly concentrated (40-60 positions) and turnover remains low. Investors have repeatedly underestimated the power of network effects and the sustainability of historically ‘supernormal’ returns (seen mainly in the technology industry). The economy is becoming more concentrated as three-quarters of US industries have seen an increase in the concentration of wealth over the past two decades. We think this potentially offers higher sustainability of returns on capital and can underpin reasonable real returns for investors.


Our deepest-held conviction is that the US will – at some point – see a sustained and meaningful increase in productivity owing to innovation and the application of new technologies to less productive industries. Three out of four US workers have seen almost no increase in the productivity of their labour since 2000 – whereas 1 in 4 (concentrated in more digitised industries) has seen more than 50% improvement. This ultimately underpins our optimistic outlook on the US economy long term.

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








Liontrust US Opportunities C Acc






S&P 500 Index






IA North America












*Source: Morningstar as at 30.09.2019, on 17.10.2019.

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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 23, 2019, 10:01 AM