Liontrust GF Special Situations Fund

• Healthcare holdings including AstraZeneca, Haleon and GSK strengthen as defensive areas fare well in February.
• Large-cap outperformance, particularly among the banks sector, remained a headwind.
• Setbacks at Renishaw and Indivior drag on monthly performance.

The Liontrust GF Special Situations Fund returned -3.0%* in February. The Fund’s comparator benchmark, the FTSE All-Share, returned 1.3%.

Mounting geopolitical instability was reflected in aerospace & defence’s position at the top of the FTSE All-Share’s sector breakdown for February – up 18% in total return terms. President Trump’s approach to the Ukrainian conflict has included calling for a swift end to the war, criticising President Zelensky and indicating an unwillingness to continue financial and military assistance. As a result, investors are factoring in higher expectations of military spending in Europe from governments attempting to fill the void and deter Russian aggression.

Ongoing uncertainty over trade tariffs also contributed to macroeconomic nervousness. Equity markets sold off in the first days of February as Trump announced a range of tariffs on Canada and Mexico, only to defer them a couple of days later having won some concessions on matters including border security. This added to investor confusion over whether Trump’s tariff threats are statements of true intent or negotiating tools.

The healthcare sector was an area of strength for the portfolio as defensive areas performed well. The release of full-year results sparked solid rallies at AstraZeneca (+7.0%), Haleon (+6.3%), GSK (+5.5%) and Convatec Group (+5.0%).

AstraZeneca recorded 25% constant currency growth in Q4 sales to take its 2024 total to over $ 54 billion – up by 21%. The performance was ahead of consensus expectations, driven by a 41% expansion in oncology sales. For 2025, AstraZeneca expects a high single-digit percentage increase in revenues, with earnings per share rising by a low double-digit percentage. It was a similar story of growth modestly beating expectations and solid forward guidance from Haleon, GSK and Convatec Group (the latter a recent new addition to the Fund).

Overall, however, when compared with the FTSE All-Share Index, the Fund faced similar headwinds to those present during much of 2024; namely, the outperformance of large-caps versus small and mid-caps, particularly among banks, a sector the Fund does not own. The banks sub-sector was the second strongest in February behind aerospace & defence, rising 11%.

We have previously written at length about the tough relative performance environment at the back end of last year, as well as the mounting potential for outperformance from some of the more unloved areas of the market as and when sentiment recovers and valuations revert towards long-term averages.

Compounding these negative attribution trends were a couple of stock-specific setbacks which tipped overall Fund performance into negative territory for the month. 

Renishaw (-20%) has been contending with cyclical weakness in many of its industrial end markets. The specialist in high-tech precision engineering for metrology and healthcare commented in February’s half-year results that order intake has recently improved, but investors focused instead on a deterioration in quarterly sales. A slowdown in its second quarter meant that six-monthly sales rose only 3% year-on-year to £341 million, with profit before tax rising 2% to £57.5 million – both below expectations. Although Renishaw says it has seen improved order trends, particularly from semiconductor and consumer electronics customers, its 2025 guidance also fell short of investor expectations.

Everplay (-28%) – recently renamed from Team17 – and Fever-Tree Drinks (-16%) gave back January’s gains, the latter of which was triggered by a strategic partnership with Molson Coors. The North American brewing giant will take on US production and distribution for Fever-Tree in order to accelerate US growth, also making a £71 million investment to acquire an 8.5% stake in Fever-Tree – the proceeds of which will be returned to shareholders via a share buyback scheme. There was no newsflow to trigger Everplay’s retracement of last month’s rise.

Returning to positive developments, Alfa Financial Software (+7.2%) rallied through February after issuing an upbeat Q4 trading update at the end of January. The software provider to the asset finance sector described the quarter as “exceptional” in terms of converting prospects to contract wins, with five deals secured. Q4 revenue growth of 21% year-on-year took the 2024 total to £110 million, up 8%. Operating profit growth was ahead of expectations at 13% (to £34 million). Following eight contract wins over the year, Alfa now has total contracted value of £221 million, up 34% over the year. With its Alfa Systems 6 product recently launching across all regions, the company is upbeat regarding the outlook for growth in 2025.

Learning Technologies Group (+8.5%) edged closer to completion of its acquisition by US private equity vehicle General Atlantic, a 100p-a-share transaction over which we have expressed our dissatisfaction on several occasions. The Fund sold out of the position ahead of the deal’s imminent conclusion.

Positive contributors included:

Learning Technologies Group (+8.5%), Alfa Financial Software (+7.2%), AstraZeneca (+7.0%), Haleon (+6.3%) and GSK (+5.5%)

Negative contributors included:

Everplay Group (-28%), Renishaw (-20%), Fevertree Drinks (-16%), Kainos Group (-15%) and Integrafin (-11%).

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

Past performance does not predict future returns

*Source: Financial Express, as at 28.02.25, 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 31.12.24, total return (net of fees and income reinvested), primary class. Investment decisions should not be based on short-term performance.

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.

Past performance does not predict future returns. You may get back less than you originally invested.

We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.

• 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.
• The Fund 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. 
• The Fund will invest in smaller companies and may invest a small proportion (less than 10%) of the Fund in unlisted securities. There may be liquidity constraints in these securities from time to time, i.e. in certain circumstances, the 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 the fund to defer or suspend redemptions of its shares. 
• 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.

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