The Liontrust GF UK Growth Fund returned 0.6%* in October. The Fund’s comparator benchmark, the FTSE All-Share, returned 1.8%.
Supply chain bottlenecks and inflationary pressures remained on the agenda through the month but equity markets drifted higher as investors wait to see what action central bankers might take. The MSCI World Index of developed markets notched up a 3.9% gain, while the FTSE All-Share rose 1.8% - a gain led by the 2.2% rise in the FTSE100.
A couple of the Fund’s largest risers were driven by upgrades to guidance within Q3 updates. Indivior (+13%) upgraded its 2021 financial guidance as its new product Sublocade continues to experience rapid growth from a small base whilst market share loss in its legacy opioid-addiction treatment Suboxone remains limited; net revenues are expected to be $750m - $770m, up from $705m - $770m, and pre-tax profit is simply forecast to be a “higher level than previous management expectations”. Bunzl (+10%) upgraded full-year guidance to “slight” underlying revenue growth. It generated 2.5% underlying revenue growth in Q3, as 12% growth in the base business offset a 9.4% drop in its best-selling Covid-19 related products. Bunzl provides outsourced procurement and distribution of essential everyday items that are not for resale such as packaging, labels, cleaning & hygiene products and personal protection equipment. We own the shares for the strength of its distribution network. Better-than-expected Q3 cost control at GlaxoSmithKline (+7.5%) allowed it to raise adjusted EPS growth guidance (excluding Covid-19 solutions) to between -2% and -4%, up from a mid-to-high single digit decline. Covid-19 solutions are expected to contribute 7% to 9% this year.
Future (-4.4%) also upgraded 2021 guidance to be at the top end of analysts’ expectations, driven by momentum in digital advertising. Shares in the company have performed very well since the release of results in May, and they gave back some ground in October despite the upgrade.
A couple of the Fund’s financial services holdings moved higher on solid quarterly updates on assets under management. Brooks Macdonald Group (+10%) stated that funds under management rose 2.2% to £16.8bn in the three months to 30 September; investment performance accounted for 140 basis points of the increase with the rest coming from net new business. Hargreaves Lansdown (+7.4%) also posted a solid rise in assets under administration, with new inflows and market movements contributing fairly equally to a £2.5bn increase in assets to £138bn.
The largest portfolio detractor was Petrofac (-20%), as it gave back some of the 60% share price gain it made in September on the back of reaching a plea agreement with the UK Serious Fraud Office. This retracement came as it announced a £200m placing at a 27% share price discount. The proceeds will be used to pay the £77m SFO fine and to pay down debt as Petrofac undertakes a refinancing plan.
Pearson (-15%) shares fell on the release of a Q3 trading update that maintained full-year guidance. Underlying revenue growth in the first nine months of 2021 was 10% following growth in a number of divisions such as Virtual Learning and English Language Learning, but investors were concerned by the ongoing drop in US Higher Education Courseware, where sales fell by another 9%.
Wm Morrisons Supermarkets left the portfolio as its £10bn sale to US private equity investors completed.
Positive contributors included:
Indivior (+13%), Brooks Macdonald Group (+10%), Bunzl (+10%), Next Fifteen Communications (+9.6%) and Hargreaves Lansdown (+7.4%)
Negative contributors included:
Petrofac (-20%), Pearson (-15%), WH Smith (-8.8%), John Wood Group (-7.2%) and Future (-4.4%).
Discrete years' performance** (%), to previous quarter-end:
Sep-21 |
Sep-20 |
Sep-19 |
Sep-18 |
Sep-17 |
|
Liontrust GF UK Growth C3 Inst Acc GBP |
25.7% |
-10.2% |
2.5% |
8.8% |
10.6% |
FTSE All Share |
27.9% |
-16.6% |
2.7% |
5.9% |
11.9% |
*Source: Financial Express, as at 31.10.2021, total return (net of fees and income reinvested), sterling terms, C3 institutional class. Non fund-related return data sourced from Bloomberg.
**Source: Financial Express, as at 30.09.2021, total return (net of fees and income reinvested), primary class. Discrete data is not available for five full 12-month periods due to the launch date of the portfolio. Investment decisions should not be based on short-term performance.
Key Risks