Liontrust Special Situations Fund

The Liontrust Special Situations Fund returned 5.2%* in April. The FTSE All-Share Index comparator benchmark returned 4.3% and the average return in the IA UK All Companies sector, also a comparator benchmark, was 4.2%.

Ongoing positive sentiment towards the vaccine effort and related economic recovery supported more broad-based market gains in April. The FTSE 100 large-cap index returned 4.1%, the FTSE 250 mid-caps gained 4.9% and the FTSE Small Cap Index registered a 5.3% return.

Signs of increasing economic confidence were apparent in macro releases such as March UK retail sales. This showed a 5.4% increase on February, ahead of the 1.5% consensus forecast, and 7.2% above March 2020’s level.

Across the market, a range of companies also pointed to improving demand from end markets. For the Fund, one of the holdings displaying exposure to this trend in April was PageGroup (+19%). The recruitment company’s Q1 trading update provided investors with some encouraging signs over the trajectory of economic recovery. While PageGroup saw 2% year-on-year growth in gross profit, it is the comparison with pre-Covid levels two years ago that is more revealing. Gross profits are down 10% on Q1 2019, but a significant pickup in activity in March meant that it exited the quarter at a run rate only 2% lower than 2019 (and 30% better than 2020).

Domino’s Pizza Group (+13%) recorded 19% year-on-year sales growth in Q1, a comparison that isn’t flattered by any negative Covid-19 impact in 2020, as Domino’s trading has been largely unscathed by the pandemic. Earlier in the year it noted that the new year period delivered its highest ever weekly sales figure. It also recently announced the disposals of its operations in Sweden and Iceland, as it further consolidates its focus on the UK market.

Next Fifteen Communications (+29%) slipped to a pre-tax loss in the year to 31 January 2021 due mainly to over £36m in one-off costs related to acquisitions during the year. Adjusting for these, operating profit rose 21% to £50m following revenue growth of 7% to £267m. The shares were given impetus by an upbeat outlook section commenting that trading in the new year has been ahead of management’s expectations.

The weakest trading update for the Fund in April came from cloud computing company Iomart Group (-12%). It warned that results for the year to 31 March 2021 would be at the lower end of expectation after the UK’s third lockdown hampered the recovery in activity it had previously experienced. The impact was primarily felt through a drop in non-recurring hardware reselling as customers delayed investment decisions.

There was better news from sustainable investment specialist Impax Asset Management (+29%), which reported further strong growth in assets under management, up 19% to £30bn in the three months to 31 March 2021. The majority of the increase – £4bn – resulted from strong net flows, with positive market movements also contributing £813m.

An interim update from translation and IP support services group RWS Holdings (+13%) revealed trading that was in line with its forecasts, but shares in the company moved higher on the back of a significant upgrade to expected cost synergies from its SDL acquisition, which more than doubled from £15m to £32m.

Shares in Royal Dutch Shell (-2.7%) have returned around 44% since the end of October, participating in the sharp ‘vaccine rally’ alongside a broader energy sector which has been among the market’s strongest areas. Although crude oil prices made some modest ground during April, shares in Royal Dutch Shell edged lower as investors found little within Q1 results to give further short-term momentum.

Positive contributors included:

Craneware (+30%), Impax Asset Management (+29%), Next Fifteen Communications (+29%), PageGroup (+19%) and GlobalData (+14%).

Negative contributors included:

Iomart Group (-12%), Ideagen (-8.9%), Brooks Macdonald Group (-4.9%), Royal Dutch Shell (-2.7%) and Renishaw (-2.3%).

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

*Source: Financial Express, as at 30.04.21, 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 31.03.21, total return (net of fees and income reinvested), bid-to-bid, primary class.

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.