Liontrust Special Situations Fund

• Large caps and defensive areas of the market outperform as macroeconomic uncertainties remain heightened.
• Everplay and Fevertee regain momentum after investor updates, having slid last month in the absence of newsflow.
• Amid weakness in cyclicals, Spectris and Spirax Group fell.

The Liontrust Special Situations Fund returned -4.8%* in March. The FTSE All-Share Index comparator benchmark returned -2.3% and the average return in the IA UK All Companies sector, also a comparator benchmark, was -3.3%.

A subdued market environment persisted in March as Donald Trump showed little sign of backtracking on his promise of a further batch of reciprocal tariffs in early April and geopolitical tensions surrounding the Ukraine conflict remained elevated. European markets continued their year-to-date outperformance of the US – a reversal of prior years’ established trend – as Germany’s plans to expand borrowing and unleash hundreds of billions of investment in defence and infrastructure promised a large fiscal boost to the region.

On the UK market, defensive areas such as telecoms and utilities held up best, while more cyclical areas like consumer discretionary, industrials and financials found themselves in negative territory. The FTSE 250 mid-cap segment’s underperformance of large-caps was extended – down 3.9% compared to a 2.0% fall for the FTSE 100 – as it was for the FTSE AIM All-Share index, which returned -3.0%.

For the year to date there is now a conspicuous gap between the performance of the FTSE 100 – up 6.1% - and of companies further down the market cap scale, with both the FTSE 250 and FTSE AIM All-Share losing around 5%. As the managers have stated on a number of occasions, this relative performance trend – driven itself by risk aversion stemming from macro events – has opened an opportunity to invest in small cap companies at valuations which are at generational lows.

Amid cyclical weakness, the portfolio’s holdings in industrial engineers Spectris (-19%) and Spirax Group (-15%) were affected.

Spectris shares fell during 2024 as demand softened, particularly from China. Having managed investor expectations lower through the year, Spectris prompted a brief share price rally in January as it commented that 2024 profit would be ahead of consensus expectations.

However, these gains were given back in March following the publication of full 2024 results on the last day of February. While the 2024 performance was largely in line with recent company guidance, there wasn’t sufficient positive outlook comment to sustain share price momentum. Sales for the year were 7% lower, with operating profit dropping 20%. While Spectris saw some signs of demand improvement in the final quarter, it stated that it is too early to predict a sustained recovery in end markets. Faced with a subdued demand outlook, the company is focusing on cost base rationalisation in order to return to profit growth in 2025.

Spirax Group, the specialist in niche industrial and commercial steam systems, released 2024 results showing 4% organic revenue growth – an outperformance of global industrial production, which was weaker than expected at 1.7%. However, adverse exchange rate movements had an impact on both sales and profits during the year; a five percentage point sales impact pushed reported growth to -1%. As an industrial engineering group, Spirax’s long-term growth path remains subject to shorter-term cyclical fluctuations in demand. Spirax is cautious on the outlook for industrial production, with Chinese demand expected to remain weak, although it expects to maintain a similar level of organic growth in 2025.

Two stocks to feature in the detractors last month in the absence of newsflow both rallied after providing investor updates in March. Firstly, everplay (+43%) rose sharply after releasing 2024 results. Having rebranded from Team17 and refocused on own-IP titles, the video game specialist grew revenue by 5% to £167 million after its back catalogue registered 27% revenue growth. The company has seen good trading carry over from the key festive sales period into the start of 2025, and it now expects full-year results to be marginally ahead of market expectations.

Fevertree Drinks (+21%) also regained momentum in March with the release of 2024 results which showed revenue growth acceleration to 7% in the second half of the year, taking the 12-month rate to 4% – healthy growth against what the company describes as a subdued consumer environment. The immediate outlook for Fevertree is now dominated by the Molson Coors strategic partnership announced in January, which should accelerate US growth. Fevertree has maintained 2025 guidance – low-single digit revenue growth – in what it sees as a transitional year ahead of stronger medium-term growth. To hear more about Fevertree’s rapid growth and future prospects, listen to our conversation with CEO Tim Warrillow – part of our Stock Exchanges podcast series.

Big Technologies (-30%) was the largest monthly faller on news, as reported by the company on 31 March 2025, that its CEO and founder, Sara Murray, has been dismissed by the company over concerns around her conduct during the legal case brought by a small number of former shareholders in its Buddi subsidiary. The company announced that it has concluded that Murray, who personally holds around 27% of Big Technologies’ share capital, failed to disclose interests in four entities with substantial shareholdings in the company at the time of the company’s IPO and subsequently. Big Technologies has issued legal proceedings of its own against Murray. The company commented that current trading is in line with market expectations, and it has a robust balance sheet position of £101.1m of net cash as at the end of February.

GlobalData (-21%) also lost ground despite announcing 2024 results which were largely in line with expectations. Last month GlobalData announced a £50 million share buyback programme and its intention to move from the junior AIM market to the London Stock Exchange’s Main Market in order to access a larger pool of potential investors. In the short term, an overhang from inheritance tax (IHT) investors may weigh on the shares due to the fact that tax relief status is lost when the shares move to the main market. However, following the move (expected to occur in the second quarter of the year), greater liquidity and investor interest is likely to catalyse a reversal of this dynamic.

Shell (+7.2%) saw a positive investor response to its new strategic goals unveiled at a capital markets day. While the energy giant will look to generate growth through a focus on its liquified natural gas division – seeking 3% to 5% annual growth through to 2030 – it is also stepping up its focus on cost control, lowering capex and raising its structural cost cutting targets. As a result, it expects free cash flow to rise at over 10% a year through to 2030. Shell also announced that a greater proportion of cash flow will be returned to shareholders via share buybacks and dividends – 40% to 50% of cash flow from operations, up from 30% to 40% previously. 

An AGM update from Impax Asset Management (+4.5%) outlined a fall from £34.1 billion assets under management at the end of 2024 to £28.5 billion at the end of February, following the previously announced loss of a £5.1 billion mandate to manage a St James’s Place fund. It additionally announced that it expects net outflows for March as a result of some institutional account closures. St James Place has responded to the asset contraction by cutting around £11 million in annual costs. The company commented that this year’s investor rotation away from US mega cap stocks has benefitted its investment performance, with almost 70% of strategies outperforming their benchmarks year to date.

Positive contributors included:

everplay Group (+43%), Fevertree Drinks (+21%), Shell (+7.2%), Impax Asset Management (+4.5%) and Unilever (+2.7%).

Negative contributors included:

Big Technologies (-30%), GlobalData (-21%), Spectris (-20%), Future (-19%) and Spirax Group (-15%).

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

*Source: Financial Express, as at 31.03.25, total return (net of fees and income reinvested), bid-to-bid, institutional class. **Source: Financial Express, as at 31.03.25, total return (net of fees and income reinvested), bid-to-bid, primary class.

KEY RISKS

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.

The Funds managed by the Economic Advantage team:

• May invest in smaller companies and may invest a small proportion (less than 10%) in unlisted securities. There may be liquidity constraints in these securities from time to time, i.e. in certain circumstances, a 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 a fund to defer or suspend redemptions of its shares. 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.
• 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.
• May invest in companies predominantly in a single country which maybe subject to greater political, social and economic risks which could result in greater volatility than investments in more broadly diversified funds.
• Outside of normal conditions, 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.

The risks detailed above are reflective of the full range of Funds managed by the Economic Advantage team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.

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.

DISCLAIMER

This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.

It 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.

This information and analysis 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, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.

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