Liontrust China Fund

The Liontrust China Fund returned 0.3% over the quarter, ahead of the IA China/Greater China sector average of -0.6% and -1.3% from the MSCI China Index (both comparator benchmarks)*.

The Chinese benchmark began the year with a sharp decline, continuing the negative trend of 2023 driven by concerns around the property sector and weak economic data. However, the government soon announced a number of market support measures to stem declines. Furthermore, economic data in January and February were stronger than expected. In particular, consumer data was strong over the Chinese New Year holiday, especially for travel and tourism. This strengthened sentiment and helped to renew interest, resulting in the benchmark recovering the majority of earlier losses and finishing down -1.3% for the quarter.

Significant contributors to outperformance came from our positions in the IT sector, specifically those companies that were exposed to rising AI trends. The materials sector also outperformed, driven by companies exposed to the recent increases in gold and copper prices. Also, specific stocks in the consumer discretionary sector performed well, including a domestic sportswear company which reported results above expectations and with good margin trends. Top contributors also included a white goods company which raised its dividend and an online travel agent benefitting from the aforementioned strong travel and tourism trends. This helped to offset some underperformance in the healthcare sector which saw some headwinds due to increased geopolitical risk and also poorer performance in the consumer staples sector.

This quarter, we adjusted our positions in the consumer staples sector, exiting a position in an infant milk formula company and replacing it with a leading spirits company which we believe has strong brand equity and more earnings certainty. We also initiated a position in a large battery manufacturer with a dominant position in the supply chain and industry leading margins. This was paid for by a reduction in the healthcare sector. We also shifted some weight in the consumer discretionary space from a large ecommerce player to a local services provider, which has higher growth prospects amidst easing competition.

At the annual parliamentary meeting in March, the government stated a 5% GDP growth goal for 2024, showing confidence in growth for this year. Market stabilisation measures from the government have also helped to improve sentiment this quarter, causing a significant recovery after initial losses. Despite this recovery, the market remains extremely attractive on a valuation basis and we await additional catalysts to drive further positive performance. Specifically, any measures to stabilise the property market would be a marked positive which would also translate to increased consumer confidence. We are mindful that the US presidential election later in the year could cause some volatility as geopolitical tensions could rise, however we look for further economic improvements and upward earnings revisions.

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

*Source: FE Analytics, as at 31.03.24, primary share class, total return, net of fees and income reinvested.

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.

Overseas investments may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of the Fund. This Fund may have a concentrated portfolio. If one of these investments or sectors / factors fall in value this can have a greater impact on the Fund's value than if it held a larger number of investments across a more diversified portfolio. The Fund 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. Investments in emerging markets may involve a higher element of risk due to less well-regulated markets and political and economic instability. This may result in higher volatility and larger drops in the value of the fund over the short term. Outside of normal conditions, the Fund 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. Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails. ESG Risk: In reference to any component (where applicable) of a fund's investment process that uses external ESG data, there may be limitations to the availability, completeness or accuracy of ESG information from third-party providers, or inconsistencies in the consideration of ESG factors across different third party data providers, given the evolving nature of ESG.

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.