- The UK market continues to provide a wealth of opportunities to invest in businesses rich in intellectual capital, and we think it is still attractive for start-ups.
- Our multi-cap approach allows us to hunt out small, entrepreneurial businesses that will be the compounding heroes of tomorrow,
- UK sentiment is improving, with a growing pipeline of IPOs, increased M&A and supportive policy indications.
The UK stock market continues to provide a wealth of investment opportunities
We have been investing for almost 27 years in companies with superior competitive advantage that can generate strong returns on capital, compounding growth for many years into the future.
In our opinion, the UK market still holds a wealth of businesses which are rich in the intellectual capital our investment process seeks out.
At the sector level, this strength and depth of intellectual property is apparent in the UK’s tech ecosystem (Europe’s largest), its high-quality engineering groups, and its healthcare sector, which – with two of the world’s top 10 pharma stocks in Glaxo and Astra – punches well above its weight on the global stage.
And it is still an attractive venue for start-ups.
The UK has one of the most comprehensive legal systems in the world, protecting owners of intellectual property. It also provides a fertile ecosystem to nurture early-stage innovation, allowing businesses to commercialise their innovations. The UK has three of the top 10 universities in the world, the base for some of the most effective science and technology clusters globally.
The startups of today become the listed companies of tomorrow, providing us with the opportunity to compound capital growth by backing these home-grown innovators over the long term.
A truly active, multi-cap approach
In our view, hunting down these opportunities requires true active management. We have always been committed to investing across the market cap scale, with varying degrees of exposure to small and mid caps depending on which of our four funds is in the spotlight.
Our approach to investing in smaller companies is to align ourselves with entrepreneurial owner-managers – management teams who hold significant amounts of equity in the business alongside us. We think these managers make decisions which are in the best interests of the business over many years, rather than being overly fixated on the short term.
One area where this manifests time and again is investment in R&D, looking for the product breakthroughs that will support the company’s growth years into the future – the very lifeblood of ambitious businesses.
Investing in those entrepreneurial smaller companies works. Of the top ten performers in the Liontrust Special Situations Fund over the past decade, eight were bought as small caps.
The power of compounding reliable but yet comfortably above-market growth rates year upon year for a decade or more is well documented but often forgotten. It is a simple formula, but over time, it really works.
And when it comes to the compounding heroes of tomorrow, we are as excited as we have ever been about continuing to find intellectual capital-rich businesses which have been the drivers of our funds’ return for so many years and to champion the fantastic investment opportunities we still see right here on our doorstep.
Unwavering conviction in our process and the opportunity to generate alpha in the UK
The UK public markets have faced challenging times in recent years, but the mood is shifting, with a growing pipeline of IPOs, an increase in M&As, and supportive indications around pension fund allocations, which could have a significant impact.
As for our team, we are more enthusiastic than ever. Why? While experience is important, the key lies in our tried-and-tested process, which provides us with clarity in our actions. We have unwavering conviction in our process and the opportunity to generate returns and alpha in the UK from here. Because it works.
About the presenters
Anthony Cross joined Liontrust in 1997 and launched the Liontrust UK Smaller Companies Fund in 1998. He has also managed the Special Situations and UK Micro Cap funds since launch. Before moving to Liontrust, Anthony joined Schroder Investment Management as a graduate trainee, later becoming an equity analyst before joining the Smaller Companies team in 1994. Anthony Cross graduated in 1990 from Exeter University with a degree in Politics.
Victoria Stevens joined the Economic Advantage team in June 2015 to help research and analyse investment opportunities primarily across the small cap universe. She previously worked for almost five years at the growth company specialist broking and advisory firm finnCap Ltd, latterly as deputy head of corporate broking. Prior to joining finnCap, Victoria was a senior reporter and diary editor at the financial newspaper City AM, having studied Modern Languages at Oxford University.
Matt Tonge joined the Economic Advantage team in 2015 to help research and analyse companies across the small cap universe having worked closely with Anthony Cross and Julian Fosh for many years. Matt originally moved to the Liontrust trading desk in 2003 from Barclays Capital Asset Management. Responsible for execution across all the firm’s assets, in 2014 he was voted Mid-Tier trader of the year by The Trade magazine for his work in mid and small cap stocks, the inaugural year of the award. Matt graduated from the University of Birmingham in 2000, with First Class Batchelor degrees in Manufacturing Engineering (BENG) & Commerce (BCOM), winning the Gilbert Walker Prize in Engineering and Economics as top student in his year.
KEY RISKS
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
The Funds managed by the Economic Advantage Team:
May have a concentrated portfolio, i.e. hold a limited number of investments. If one of these investments falls in value this can have a greater impact on a Fund's value than if it held a larger number of investments. May encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings. May invest in companies listed on the Alternative Investment Market (AIM) which is primarily for emerging or smaller companies. The rules are less demanding than those of the official List of the London Stock Exchange and therefore companies listed on AIM may carry a greater risk than a company with a full listing. May invest in smaller companies and may invest a small proportion (less than 10%) in unlisted securities. There may be liquidity constraints in these securities from time to time, i.e. in certain circumstances, a fund may not be able to sell a position for full value or at all in the short term. This may affect performance and could cause a fund to defer or suspend redemptions of its shares. Outside of normal conditions, may hold higher levels of cash which may be deposited with several credit counterparties (e.g. international banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash. May be exposed to Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails.
The risks detailed above are reflective of the full range of Funds managed by the Economic Advantage Team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.
DISCLAIMER
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.
This 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust.
