Following a 2024 performance that was boosted by a good final quarter, the managers look ahead with confidence for the Fund’s holdings. Money transfer specialist Wise was a top Q4 performer after the fund managers topped up the position during a share price dip earlier in the year. Very attractive valuations underpin an exciting outlook for UK small companies.
Peter: The UK Ethical Fund had a strong final quarter, delivering returns of 2.2% and outperforming the MSCI UK benchmark by 2.4%. The calendar year of 2024 was positive too. Returns were 7.5%, that's ahead of the benchmark by 0.6%. Over the quarter, WISE, Trainline and Trustpilot were key contributors to returns, while Genuit and Kingspan detracted. Genuit is a 2.3% holding in the UK Ethical Fund. It manufactures and distributes products for the control of water and air in buildings. These are key challenges in making our built environment more sustainable. For instance, their storm water management products slow down water flows during storms, improving the ability of our wastewater systems. In addition, as our homes move to electric from gas heating, so there will be more demand for their underfloor heating systems. We believe its prospects are strong as demand for these products recovers. That said, it was pleasing to see the returns being led by Wise. This is an investment we've had since early 2022. It had fallen mid-year. and we used this as an opportunity to add to our position. WISE, which used to be called TransferWise, is aligned with our theme of 'Transparency in Financial Markets' and it's seen strong growth as a result of its efficient platform for foreign exchange transactions. Traditional conversion between currencies has always been slow, opaque, and costly. Wise makes it rapid, transparent, and low cost. Indeed, as they grow, so the transaction costs come down and we were really pleased to see them signing new deals with NuBank in Brazil, Standard Chartered, and Morgan Stanley.
Martyn [00:02:26] Trainline, the UK's leading online train ticketing platform performed well over 2024 with shares up 38%. The company posted another year of strong revenue growth driven by e-ticket penetration in the UK and liberalisation of key European rail lines in Italy and Spain. Trainline's international growth strategy is starting to bear fruit with strong user engagement and repeat use and increasingly recognised brands. The company also showed strong cost discipline, with growing profit margins and strong cash generation. The management has signaled their confidence in the future prospects of the business by launching a share repurchase programme, taking advantage of the disconnect between the intrinsic value of the business and the share price today, and increasing our share of future cash flows.
Peter [00:03:21] Regarding transactions within the UK portfolio in the quarter, we started a new position in Berkeley Homes. This is linked to our theme around 'Building Better Cities'. Berkeley have a very strong track record of delivering high quality housing in areas of urban regeneration. They operate in London and the South East where the shortage of quality housing is most acute. Importantly 93% of the homes they sell have had A or B energy efficiency ratings. And remember that the average for the UK housing stock is a lowly D rating. With the UK government working to increase the supply of housing, we believe Berkeley Group should see strong long-term returns from here.
Martyn [00:04:13] If we look to the future, we remain hugely optimistic about returns for our Sustainable Future investment process, and particularly those small UK companies trading on very attractive valuations. We see no sign of scientific progress slowing, and governments and businesses remain committed to delivering a more sustainable and prosperous economy. Companies leading the way in healthcare innovation, cybersecurity and energy efficiency for example, will continue to grow, delivering both tangible benefits to society and strong financial returns for our clients.
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.
The Funds managed by the Sustainable Future Team:
- Are expected to conform to our social and environmental criteria.
- May hold overseas investments that 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 a Fund.
- May hold Bonds. Bonds are affected by changes in interest rates and their value and the income they generate can rise or fall as a result; The creditworthiness of a bond issuer may also affect that bond's value. Bonds that produce a higher level of income usually also carry greater risk as such bond issuers may have difficulty in paying their debts. The value of a bond would be significantly affected if the issuer either refused to pay or was unable to pay.
- 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 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. 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, under certain circumstances, invest in derivatives, but it is not intended that their use will materially affect volatility. Derivatives are used to protect against currencies, credit and interest rate moves or for investment purposes. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions. The use of derivatives may create leverage or gearing resulting in potentially greater volatility or fluctuations in the net asset value of the Fund. A relatively small movement in the value of a derivative's underlying investment may have a larger impact, positive or negative, on the value of a fund than if the underlying investment was held instead. The use of derivative instruments that may result in higher cash levels. Cash may be deposited with several credit counterparties (e.g. international banks) or in short-dated bonds. A credit risk arises should one or more of these counterparties be unable to return the deposited cash.
- Do not guarantee a level of income.
The risks detailed above are reflective of the full range of Funds managed by the Sustainable Future 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.
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.
