Liontrust Global Technology Fund

The Liontrust Global Technology Fund continues to invest in global leaders and disruptors within the technology sector that are well positioned to benefit from the new AI-driven technology cycle. 

• Earnings updates throughout November provided us with good insight into how companies are balancing current market conditions with longer-term structural opportunities.
• Tesla, Snowflake and Shopify were among the contributors to Fund performance in November.
• We maintain our valuation discipline – trimming into strength where appropriate while remaining alert to opportunities in innovative global businesses positioned on the right side of disruption.

The Liontrust Global Technology Fund returned 3.7% in November, placing it in the 4^th quartile of peers, versus the IA Technology & Telecommunications sector average of 6.3% and the MSCI World IT Index which returned 6.4% (both are comparator benchmarks).

Longer term performance remains strong, with the Fund having returned 68.3% since manager inception (08.02.2023), in the 1st quartile of peers, and ahead of the IA Technology & Telecommunications sector return of 47.0% and the MSCI World IT Index return of 68.0%.

Market backdrop

November began with a flurry of consequential macro events, most notably the US presidential election on 5^th November. The quick, decisive outcome served as a major risk-clearing event for markets, fostering an unwinding of crowded shorts and driving a retracement in the VIX volatility index. Trump's victory, alongside a broader Republican sweep, bolstered US stocks given expectations around deregulation and the potential for corporate tax cuts, helping the S&P 500 rally over 5.7% in November − its biggest monthly gain of 2024. “Trump-trade” stocks proved key beneficiaries, including small caps, cryptocurrencies, speculative technology stocks, and financials (particularly regional banks). Despite some concerns around the US deficit and inflation implications of potential Trump administration policies, bond yields remained relatively stable following October's significant backup, providing a supportive backdrop as we enter the final month of the year.

Policy developments also proved supportive, the U.S. Federal Reserve implementing another 25 basis point rate cut, while Chairman Jerome Powell moved to quell speculation about potential political interference by reaffirming the Fed's independence. Elsewhere, China's National People's Congress unveiled a substantial 10 trillion yuan stimulus package. While the scale of the package was largely in-line with expectations, there was some disappointment in the composition – focused on local government debt relief rather than direct consumption and fiscal support – leading to subsequent softness in Chinese stocks. Nonetheless, this stimulus represents an important step in Beijing's efforts to reinvigorate growth, with additional support measures anticipated in early 2025.

Elsewhere, spending data from November's major shopping events, including Black Friday and China’s Singles Day, provided insight into consumer patterns. Against a backdrop of economic uncertainty and technological change, consumers demonstrated a clear preference for discounted offerings while accelerating their shift toward online platforms. US retail spending rose 3% year-on-year over the Black Friday period, driven by double-digit e-commerce growth (Mastercard SpendPulse). In China, where consumers have been particularly weak, recent stimulus efforts − notably trade-in subsidies − supported consumption through the Singles Day period, though earnings season updates continued to highlight China as an ongoing area of weakness.

The third quarter earnings season otherwise proved broadly positive, with market sentiment buoyed in particular by companies continuing to validate the artificial intelligence growth narrative. Most notable was Nvidia (held in the portfolio), a bellwether for broader market sentiment, which delivered impressive results with data centre revenues increasing 112% year-on-year. Management provided strong guidance for their next-generation Blackwell processors, helping allay market concerns around AI growth going in to 2025 and beyond.

Company updates

Earnings updates throughout November provided us with good insight into how companies are balancing current market conditions with longer-term structural opportunities, our analysis supported by our recent research trip to global innovation hubs of Silicon Valley and Boston. Importantly, we continue to see good investment opportunities in innovative leading and disruptive technology companies plugged in to long term structural trends, with new winners emerging as we enter a new innovation cycle driven by AI.

Unsurprisingly Tesla was the top contributor to Fund performance in the month, the shares rallying over 40% following the US election outcome. CEO Elon Musk's strategic alignment with the incoming administration helped bolster investor sentiment, particularly regarding potential regulation for the company's autonomous driving ambitions and broader electric vehicle strategy. Tesla remains well positioned with competitive advantages in manufacturing efficiency (where it maintains industry-leading production costs) and artificial intelligence (where its Full Self-Driving technology continues to show rapid improvement), but as shares approach our target price we took this opportunity to exercise our valuation discipline and made our first significant trim of the position this year.

Snowflake was another top performance contributor, its shares inflecting after strong quarterly results highlighting strong growth and improved efficiency. As companies increasingly need to unify and analyse vast amounts of data for AI initiatives, Snowflake's cloud data platform is proving increasingly valuable. Customer adoption continues to be driven by the platform's ease of integration, faster time to value, and robust data governance capabilities. The company is seeing particular success in newer product offerings, with Snowpark on track to contribute 3% of group revenues (customers report 50% cost savings from migrating to this solution), while new data engineering tools focused on interoperability and data transformation have already surpassed $200 million in annual recurring revenue. The company's own AI/ML (machine learning) features are also seeing strong adoption, now used by over 3,200 accounts. This momentum is reflected in strong product revenue growth, which stabilised at 29% year-on-year. Importantly forward demand looks strong, with RPO growth accelerating to 55%. With ongoing innovation and strategic moves to improve its offering (including an Anthropic partnership that will integrate its latest AI models into Cortex AI for app building), Snowflake is positioning itself well for maintained growth momentum in the face of hyperscaler competition.

Elsewhere, Shopify, a global leader in commerce technology, also contributed strongly to performance after delivering another impressive quarter where it demonstrated the scalability of its integrated platform approach. Revenues rose 26% year-on-year as the company continues to enhance its offering through AI-driven innovations that are delivered at no additional cost to merchants - from automated customer service responses to improved product discovery tools. This value creation is driving continued platform adoption, with particularly strong momentum in B2B where gross merchandise value grew 145%, and international markets which grew 33%. Importantly, this growth is translating into significant operating leverage, helping margins expand 600 basis points year-on-year as the company maintains disciplined cost control.

Similarly, Upstart posted a strong beat and raise, benefiting from improved operational efficiency and the investments made to improve its AI-driven lending platform throughout recent challenging market conditions. Upstart now fully automates over 90% of loans and is delivering significant value by reducing processing times in auto refinancing from 19 to 9 days while maintaining strong credit quality − enabling car owners to save an average of $800 per year. This is helping drive strong loan volume growth (up 64% year-on-year and 31% sequentially), supporting top-line growth of 20%. Meanwhile margins are expanding thanks to a combination of higher conversion rates on personal loans (22%), improved automation in borrower onboarding, and general cost reductions across the business. With improved operational efficiency, expanding partnerships, and stabilising consumer credit conditions, the company appears well positioned for the improving rate environment ahead.

Conversely, companies exposed to Asian markets − particularly China − faced continued headwinds in November, with key detractors to performance including Meituan and in particular PDD. PDD, a leading e-commerce platform in China, highlighted the ongoing challenges in the Chinese consumer environment in its mid-month earnings update. While the company continues to grow strongly, with revenues increasing 44% year-on-year and GMV growth ahead of peers, heightened competition and the need to maintain price competitiveness led to increased investment in merchant support and ecosystem development. As a third-party platform, PDD faced additional pressure during the recent stimulus-driven shopping during festival season, where it had to provide substantial merchant subsidies to remain competitive with peers. Despite these near-term headwinds, the company's strategic focus on strengthening its ecosystem through reduced merchant fees, enhanced support programmes, and improved compliance measures positions it well for long-term growth once markets stabilise.

Trade activity

In the midst of these updates we continue to maintain our valuation discipline, trimming or selling companies as they start to reach our target prices and buying or topping up businesses when we see attractive upside opportunities. In addition to Tesla, we took profits in several holdings that posted strong updates during the month, including both Snowflake and Upstart. We also reduced our position in Apple following recent strength, and continue to maintain a significant underweight to Magnificent Seven companies versus the MSCI World IT index, reflecting our conviction in the opportunity set presented by emerging winners of this new AI-driven technology cycle.

We also took advantage of share price dislocations to add to positions during the month. For example, early in the month we topped up Onto Innovation – a leader in advanced semiconductor metrology and inspection solutions − after it sold-off following a mixed earnings update. While quarterly guidance was impacted by a delayed lithography shipment, underlying fundamentals remained strong, particularly in high-bandwidth memory inspection where near-term quarterly fluctuations mask the strong structural growth opportunity. As next-generation AI workloads demand increasingly complex chips that rely more heavily on materials engineering for performance gains, Onto's inspection and metrology solutions are becoming increasingly vital to the manufacturing process, particularly in advanced packaging where its technology helps ensure quality and yield as manufacturers push the boundaries of chip integration. The company's strong exposure to key growth areas, including TSMC's planned expansion in advanced packaging capacity, reinforces its strategic position in this technological shift.

Looking ahead

As we enter the final month of what has been a dynamic year for markets, attention will likely focus on seasonal consumer data as well as the upcoming US Federal Reserve meeting, where expectations for another 25 basis point rate cut have recently increased.

Though ongoing political turmoil and seasonal impacts may influence markets as we approach year end, we will continue to maintain our valuation discipline, focused on investing innovative global technology companies at attractive valuations that are on the right side of emerging structural trends such as AI.

We’re excited to share insights from our recent research trip. Wishing everyone a safe and joyful holiday season. Read the full article here.

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

*Source: FE Analytics, as at 30.09.24, primary share class, total return, net of fees and income reinvested. Fund inception 15.12.15; current fund managers’ inception date is 08.02.23.

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, i.e. hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the Fund's value than if it held a larger number of investments. 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. 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.

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.