liontrust ea uk smaller companies fund
TRANSCRIPT
For professional investors and advisers only
Anthony Cross, Julian Fosh, Victoria Stevens, Matthew Tonge and Alex Wedge
October 2021
Economic Advantage:Liontrust UK Smaller Companies Fund
2021
For UK audience
Market opportunity
2
The Small Cap effect
“Over the last 60 years, UK smaller companies have delivered truly astonishing returns to investors” Professors Elroy Dimson and Paul Marsh, London Business School
Source: Numis, January 2021. The chart shows cumulative value with dividends reinvested
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. Please refer to the Key Risks slide for more information
• The Numis 1000 XIC index tracks the returns of the bottom 2% of the UK market
• The Numis Smaller Companies XIC Index tracks the returns of the bottom 10% of the UK market
• The Numis Mid Cap XIC Index tracks the returns of the smallest 20% less the bottom 5% of the UK market
• The Numis Large Cap Index tracks the returns of the top 80% of the UK market
£21,186
£8,316
£3,820£1,0310
5,000
10,000
15,000
20,000
25,000
1954 1960 1965 1971 1976 1982 1987 1993 1998 2004 2009 2015 2020
Numis Mid Cap XIC Index NSCI XIC IndexNSC 1000 XIC Index Numis Large Cap XIC Index
3
Potential pitfalls
Liquidity• Low turnover
• Long term approach
• Experienced team
Market bubbles• No loss makers
• Valuation discipline
• Strict process
Governance• UK headquartered companies
• Grading for risk
Volatility• Diversified portfolio
• Weighting approach
• Long investment horizon
Economic Advantage process
5
The Economic Advantage process
Liontrust UK Micro Cap
Fund
Liontrust UK Smaller
Companies Fund
LiontrustSpecial Situations/
GF Special Situations Funds
Liontrust UK Growth/
GF UK Growth Funds
Holdings must be profitable and headquartered in the UK
Management ownership of over 3%
Invest according to long-standing Liontrust Economic Advantage principles
Micro Cap Micro / Small Cap Small / Mid / Large Cap Mid / Large Cap
6
Economic Advantage assets
Intangible company strengths that competitors struggle to reproduce = Barriers to Competition
Intellectual property
Distribution channels
Repeat business
Franchises and licences
Customer databases and relationships
Procedures and formats
Culture Brand
Other intangible strengths:
7
Distribution network
Recurring income
Intellectual property
AJ Bell, Brooks Macdonald, Curtis Banks, Fintel, Integrafin,
iomart, JTC, Smart Metering Systems
Attraqt, Big Technologies, Craneware, Dotdigital,
Eckoh, GlobalData, Ideagen, Medica, Microlise
AB Dynamics, Animalcare, Bango, EKF Diagnostics, FRP Advisory, Instem, K3
Business Technology, Keywords Studios, Learning Technologies,
Lendinvest, Mind Gym, Mortgage Advice Bureau, Musicmagpie, Netcall, Quartix, Quixant, RWS, Sumo Group,
Tribal, YouGov
Economic Advantage assets | UK Smaller Companies portfolio
Source: Liontrust as at 31.08.21. Liontrust UK Smaller Companies portfolio. Provided as an example only of the occurrence of Economic Advantage assets in stocks typically purchased across the portfolio range
Alpha FX, Bioventix, Big Technologies, Cohort, Concurrent Technologies, Focusrite,
FW Thorpe, James Cropper, Judges Scientific, Kainos, Next Fifteen Communications, Plexus, Team 17, Trellus Health, Tristel
Arbuthnot, Charles Stanley, Clipper Logistics, Foresight, Gresham
House, Impax Asset Management, Mattioli Woods, Tatton Asset
Management
Brickability, Caretech, Gateley, Hilton Food, Inspecs, Keystone
Law, Kitwave, LSL Property Services, Midwich, On The Beach,
Pebble Group, Robert Walters
Distribution of portfolio stocks across the three hardest to replicate Economic Advantage assets
8
0%
1%
2%
3%
4%
5%
6%
7%
8%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021e
UK Smaller Market CFROC Cost of capital
Evaluating company returns | cash flow return on capital for the UK smaller companies market
What does the UK stock market look like?
Source: Canaccord Genuity Quest™ ‘UK small’ universe; prices as at 25.08.21. Cash flow returns on capital: post-tax, real economic return on total invested capital. Cost of capital: real weighted average cost of capital. 2021 is an estimated value. The market CFROC and market COC are on a rolling twelve-month forward basis
Market Cash Flow Return On Capital Long Term Cost
of Capital
9
Cash flow return on capital | UK Smaller Companies portfolio
Economic Advantage process captures value creators
Source: Canaccord Genuity Quest™; prices as at 27.07.21. Cash flow returns on capital of the fund is a portfolio weighted average cash flow return on capital FY1. UK Small and Mid universe market average. FY(1) is the next (prospective) annual unreported period
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. Please refer to the Key Risks slide for more information
13.90%
4.60%
Liontrust UK SmallerCompanies Fund CFROC
UK Small & Mid universeCFROC
FY1
10
The role of valuation
New holdings must be profitable
Valuation evaluated on a case by case basis against a basket of companies with similar characteristics
Use of a range of valuation metrics, including P/E, EV/EBITDA, FCF yield and dividend yield
Process is naturally valuation aware but high valuation alone is not a reason to exit a position
EV/EBITDA EV/ Sales FCF yield Dividend
YieldP/E
P/E – Price-Earnings ratio; EV/EBITDA – Enterprise Value to its Earnings Before Interest, Taxes, Depreciation & Amortization; EV/Sales – Enterprise Value to Sales; FCF yield – Free cash flow yield
11
Employee motivation | the importance of the “owner manager culture”
Why motivate? Academic and statistical evidence shows better company performance
Less financial gearing and fewer acquisitions
Management ownership of at least 3% required
Monitoring equity ownership – signals and relevance to all companies
“…To be successful in business and investing, you’ve got to have skin in the game, a stake in the company…” – Warren Buffett
12
Building the portfolio | risk scoring: UK Smaller Companies Fund
Risk evaluated to determine a company’s weight in the portfolio
Source: Liontrust as at 30.09.21. NAV = Net asset value; ESG = Environmental, Social, & Governance
Financial risk(gearing, cash generation, dangling liabilities, accounting, loss-making)
Product dependency
Customer dependency
Pricing risk
Regulatory change
Licence dependency
Acquisition risk
Valuation
ESG risk
45 companies
20 companies
6 companies
0%
10%
20%
30%
40%
50%
1% 2% 3%
% N
AV
Risk weights
13
Sell discipline
The company loses its tier 1 Intellectual Capital (either Intellectual Property / Distribution Channels / Repeat Business)
The company is unable to translate its theoretical Intellectual Capital advantage into superior returns
The risk scoring (particularly financial and accounting risk) is of significant concern
Management shareholdings fall below 3%
1
2
3
4
Stock examples
15
Stock example | RWS
• Global market leader in patent and life sciences translations, as well as providing technology-enabled localisation services to large corporates
• Customers include global leaders in the medical, pharmaceutical, chemical, automotive, technology and telecoms industries
• Intellectual property: know-how through considerable combined language and scientific knowledge of employees
• Distribution network: global presence across the UK and Europe, North America and Asia
• Customer relationships: counts approximately half of the top 20 patent filers worldwide as customers
• Strong financial returns; grown its dividend every year since listing in 2004
Financial advantage
RWS share price (pence)
Source: as at 16.02.21, Canaccord Genuity QuestTM. Cash flow returns on capital: post-tax, real economic return on total invested capital. Cost of capital: real weighted averagecost of capital. 2021 & 2022 are estimated numbers. Estimates are not a reliable indicator of actual performance. Share price source: Bloomberg, data 31.01.07 to 30.09.21.All use of company logos, images or trademarks in this presentation are for reference purposes only
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. Please refer to the Key Risks slide for more information
0%
10%
20%
30%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
e
2022
e
Cash Flow Returns on Capital Cost of Capital
0100200300400500600700800
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
16
Stock example | Alpha FX Group
• Provider of foreign exchange risk management consulting and alternative banking solutions
• FX consultancy offering targets medium to large scale businesses with complex global operations. High-level consultative sale encourages clients to take a measured, long-term strategic approach to FX risk management.
• Alternative banking, a new and potentially very high-growth division, encompasses payments, collections and bank account portals – leveraging highly-prized relationship with Citigroup’s worldwide local banking network
• Strong Intellectual Property within the deep know-how of staff (it takes 6-7 years for members of the sales team to reach their full potential) and software
• Emerging distribution network strength: scale leads to pricing advantage in FX rates, while Citi relationship provides a significant barrier to entry in alternative banking (scale / lengthy onboarding process)
• Rich in ‘second-tier EA intangibles’ such as culture, customer relationships, formats & procedures
Financial advantage
Alpha FX Group share price (pence)
Source: as at 26.04.21, Canaccord Genuity QuestTM. Cash flow returns on capital: post-tax, real economic return on total invested capital. Cost of capital: real weighted averagecost of capital. 2021 & 2022 are estimated numbers. Estimates are not a reliable indicator of actual performance. Share price source: Bloomberg, data from 07.04.17 to 30.09.21. All use of company logos, images or trademarks in this presentation are for reference purposes only
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. Please refer to the Key Risks slide for more information
0
500
1,000
1,500
2,000
2,500
Apr-
17
Jul-1
7
Oct
-17
Jan-
18
Apr-
18
Jul-1
8
Sep-
18
Dec-
18
Mar
-19
Jun-
19
Sep-
19
Dec-
19
Mar
-20
Jun-
20
Sep-
20
Dec-
20
Mar
-21
Jun-
21
Sep-
21
0%10%20%30%40%50%60%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
e
2022
e
Cash Flow Returns on Capital Cost of Capital
17
Stock example | Craneware
• Largest provider of pricing and billing software for US hospitals
• Growth driven by structural change resulting from changing demographics (ageing population, obesity and narcotics-linked problems) and the need for patients to get better value for their healthcare dollar
• Distribution network: 25% market share of all US hospitals
• Recurring income: software-as-a-service (‘SaaS’) model; multi-year contracts (3-9 years); customer renewals consistently running at >100% in $ value terms
• Strong financial returns, grown its dividend every year since it listed in 2007
• Intellectual property: software
Financial advantage
Craneware PLC share price (pence)
Source: as at 16.02.21, Canaccord Genuity QuestTM. Cash flow returns on capital: post-tax, real economic return on total invested capital. Cost of capital: real weighted averagecost of capital. 2021 & 2022 are estimated numbers. Estimates are not a reliable indicator of actual performance. Share price source: Bloomberg, data 12.09.07 to 30.09.21.All use of company logos, images or trademarks in this presentation are for reference purposes only
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. Please refer to the Key Risks slide for more information
0%
10%
20%
30%
40%
50%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
e
2022
e
Cash Flow Returns on Capital Cost of Capital
0500
1,0001,5002,0002,5003,0003,5004,000
2007
2008
2009
2010
2011
2012
2013
2014
2015
2015
2016
2017
2018
2019
2020
2021
Performance
19
Liontrust UK Smaller Companies | Performance YTD to 30 September 2021
25.8%
32.0%
24.5%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21
Liontrust UK Smaller Companies Fund FTSE Small Cap ex ITs Index IA UK Smaller Companies Sector
Source: Data at 30.09.21, FE Analytics, primary share class, bid-to-bid, net of fees, income reinvested basis, total return. Percentage returns 31.12.20 – 30.09.21 versus comparator benchmarks FTSE Small Cap ex ITs (Investment Trusts) Index and IA UK Smaller Companies Sector
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. Please refer to the Key Risks slide for more information
20
Liontrust UK Smaller Companies | Performance attribution YTD to 30 September 2021
Top 10 stock contributors to performance (%)
Average weight
Total return
Contribution to return
Next Fifteen Communications 2.04 116.41 1.70
dotDigital 2.74 51.38 1.33
Robert Walters 2.22 59.36 1.18
Impax Asset Management 2.04 66.92 1.14
Mortgage Advice Bureau 2.64 35.38 1.11
Big Technologies 0.52 81.50 1.02
Tatton Asset Management 1.42 87.39 0.98
Clipper Logistics 2.64 28.32 0.91
Animalcare 1.08 111.32 0.89
Brooks Macdonald 1.66 58.43 0.88
Bottom 10 stock contributors to performance (%)
Average weight
Total return
Contribution to return
iomart 1.36 -30.69 -0.48
IG Design 0.66 -17.65 -0.28
Cohort 1.44 -10.76 -0.18
Bioventix 1.23 -8.38 -0.13
Concurrent Technologies 0.43 -19.14 -0.13
musicMagpie 0.57 -9.84 -0.10
Eckoh 0.87 -11.40 -0.09
IntegraFin 1.34 -6.15 -0.08
AB Dynamics 1.18 -3.98 -0.07
Team17 1.46 -3.41 -0.06
Top 10 performance contributors Bottom 10 performance contributors
Source: Liontrust, Factset 30.09.21
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. Please refer to the Key Risks slide for more information
1.7%1.3%
1.2%1.1%
1.1%1.0%
1.0%0.9%0.9%0.9%
Next Fifteen CommunicationsdotDigital
Robert WaltersImpax Asset Management
Mortgage Advice BureauBig Technologies
Tatton Asset ManagementClipper Logistics
AnimalcareBrooks Macdonald
-0.5%-0.3%
-0.2%-0.1%-0.1%-0.1%-0.1%-0.1%-0.1%-0.1%
iomartIG DesignCohortBioventixConcurrent TechnologiesmusicMagpieEckohIntegraFinAB DynamicsTeam17
21
46.9%
72.4%
51.1%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Sep-
20
Oct
-20
Nov
-20
Dec-
20
Jan-
21
Feb-
21
Mar
-21
Apr-
21
May
-21
Jun-
21
Jul-2
1
Aug-
21
Sep-
21
Liontrust UK Smaller Companies Fund FTSE Small Cap ex ITs Index IA UK Smaller Companies Sector
Liontrust UK Smaller Companies | Performance 12 months to 30 September 2021
Portfolio return versus benchmark and peer group
Source: Data at 30.09.21, FE Analytics, primary share class, bid-to-bid, net of fees, income reinvested basis, total return. Percentage returns 30.09.20 – 30.09.21 versus comparator benchmarks FTSE Small Cap ex Its (Investment Trusts) Index and IA UK Smaller Companies Sector
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. Please refer to the Key Risks slide for more information
22
Liontrust UK Smaller Companies | Performance attribution 12 months to 30 September 2021
Top 10 stock contributors to performance (%)
Average weight
Total return
Contribution to return
Sumo Group 1.85 112.66 1.94
Next Fifteen Communications 1.89 124.07 1.79
dotDigital 2.75 71.18 1.77
Mortgage Advice Bureau 2.55 67.72 1.77
Impax Asset Management 1.83 128.46 1.73
Robert Walters 2.10 93.14 1.65
Clipper Logistics 2.66 52.16 1.53
Ideagen 2.05 67.35 1.44
YouGov 2.70 49.59 1.41
Kainos Group 1.69 91.56 1.38
Bottom 10 stock contributors to performance (%)
Average weight
Total return
Contribution to return
iomart 1.51 -37.53 -0.80
Eckoh 0.81 -17.78 -0.15
Cohort 1.48 -7.75 -0.13
musicMagpie 0.42 -9.84 -0.10
Gamma Communications 0.76 0.61 -0.09
GlobalData 1.88 -3.65 -0.09
AJ Bell 0.93 -10.06 -0.08
LSL Property Services 0.06 -6.84 -0.05
Hilton Food Group 1.49 0.04 -0.03
Eco Animal Health 0.00 -4.83 -0.01
Top 10 performance contributors Bottom 10 performance contributors
Source: Liontrust, Factset 30.09.21
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. Please refer to the Key Risks slide for more information
1.9%1.8%1.8%1.8%
1.7%1.6%
1.5%1.4%
1.4%1.4%
Sumo GroupNext Fifteen Communications
dotDigitalMortgage Advice Bureau
Impax Asset ManagementRobert Walters
Clipper LogisticsIdeagenYouGov
Kainos Group
-0.8%-0.1%-0.1%-0.1%-0.1%-0.1%-0.1%-0.1%
0.0%0.0%
iomartEckohCohortmusicMagpieGamma CommunicationsGlobalDataAJ BellLSL Property ServicesHilton Food GroupEco Animal Health
23
Big Technologies
Foresight
Inspecs
Keystone Law
Kitwave
Lendinvest
LSL Property Services
Microlise
musicMagpie
On The Beach
Trellus Health
Tribal Group
Liontrust UK Smaller Companies | Portfolio activity last 12 months
Source: Liontrust, 12 months to 30.09.21
Takeovers Management ownership < 3% Other
Stocks bought
Accesso Technology
Castings
Eco Animal Health
Gamma Communications
IG Design
IMImobile
Nucleus Financial
Paypoint
Pennant International
Trifast
Stocks sold
A
A
A
A
A
A
A
A
A
A
Fund positioning
25
Liontrust UK Smaller Companies | Fund exposures
Top 10 holdings (%)
Yougov 2.6%
Dotdigital Group 2.6%
Next Fifteen Communications 2.5%
RWS 2.4%
Robert Walters 2.3%
Mortgage Advice Bureau 2.1%
Impax Asset Management 2.1%
Big Technologies 2.0%
Clipper Logistics 2.0%
Learning Technologies 2.0%
Source: Liontrust as at 30.09.21. Fund versus FTSE Small Cap ex-ITs index, a comparator benchmark. FTSE AIM (Alternative Investment Market) Index
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. Please refer to the Key Risks slide for more information
21.7%
21.2%
20.4%
16.6%
8.9%
1.9%
0.8%
0.7%
7.7%
26.3%
12.4%
3.8%
20.6%
0.4%
4.6%
23.1%
2.7%
4.5%
0.7%
0.8%
Industrials
Financials
Technology
Consumer Discretionary
Health Care
Consumer Staples
Real Estate
Basic Materials
Energy
Telecommunications
Utilities
Cash
Sector allocation (%)
Liontrust UK Smaller Companies Fund FTSE Small Cap ex-ITs index
7.0%8.3%
68.4%
8.6%7.7%
Asset allocation (%)
FTSE 250 Index
FTSE Small Cap ex- ITs Index
FTSE AIM
Other
Cash
26
Fund facts | Liontrust UK Smaller Companies Fund
71Number of
holdings
20.9%Average
management equity ownership
69.0%Holdings paying
a dividend
64.8%Holdings with
net cash
30.3xAverage P/E of
holdings
15.7%Average earnings
growth rate
100%UK headquartered*
Source: Liontrust / Style Analytics as at 30.09.21. FTSE Small Cap ex-ITs index is a comparator benchmark. *Map represents a sample of the portfolio spread. P/E Price to Earnings ratio
27
IA Smaller Companies sector
Source: Liontrust / Bloomberg as at 30.10.20. The Tellworth fund and Stonehenge fund have been excluded as data was unavailable at time of sourcing. AUM: Assets under management
0
500
1,000
1,500
2,000
2,500
3,000
>£1,
000m
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m
IA UK Smaller Companies – Fund Average & Median Market Caps
Fund Average Market Cap Fund Median Market Cap
£7,011m43.5% AUM
£3,466m21.5% AUM £3,857m
23.9% AUM £1,185m7.4% AUM
£601m3.7% AUM
Conclusion
29
Conclusion
A unique process that identifies intangible barriers to competition and looks for evidence of strong financial returns
A focus on the importance of employee motivation in smaller companies
A sensible approach to evaluating risk
A bottom-up approach that benefits from the long-term structural growth of its individual companies
A style that is attentive to the current macro economy via day-to-day company newsflow but no attempt is made to forecast the future macro-economic outlook
A long-term/low turnover portfolio with an emphasis on IP-rich manufacturing, information technology, service companies and fee-based fund management
A long-term performance track record and committed, experienced Fund Managers
IP: Intellectual Property
30
Cumulative returns (since manager inception)Annualised returns (since manager inception)
Liontrust UK Smaller Companies Fund (UK Small Cap portfolio)
No.1 highest Alphain the sector since manager inception
1stquartile
performance over 3, 5, 10 years
and manager inception
425.2%
966.3%
Source: Data as at 30.09.21, FE Analytics, primary share class, bid-to-bid, net of fees, income reinvested basis, total return. Percentage returns from manager inception (08.01.98), versus comparator benchmarks FTSE Small Cap ex ITs (Investment Trusts) Index and the IA UK Smaller Companies Sector. Note: there were only 21 funds in the sector since launch of the UK Smaller Companies Fund. Quartile performance correct as at 30.09.21, generated 08.10.21. Alpha: A measure of the excess return generated by a fund manager. This is intended to be an indicator of manager skill rather than his or her exposure to market volatility (beta).
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. Please refer to the Key Risks slide for more information
14.0%
7.2%
10.5%
Liontrust UK SmallerCompanies Fund
FTSE Small Cap ex ITsIndex
IA UK SmallerCompanies Sector
-500%
0%
500%
1,000%
1,500%
2,000%
2,500%
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2021
Liontrust UK Smaller Companies FundFTSE Small Cap ex ITs IndexIA UK Smaller Companies Sector
2,120% return
since manager inception
2,119.8%
31
Discrete performance
Source: FE Analytics as at 30.09.21, total return, (net of fees, income reinvested), bid-to-bid, primary share class. Funds versus comparator benchmarks. Quartile performance and sector rankings correct as at 30.09.21, generated 06.10.21.
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. Please refer to the Key Risks slide for more information
To previous quarter 12 months ending (%) Sep-21 Sep-20 Sep-19 Sep-18 Sep-17Liontrust UK Smaller Companies I Inc 46.9 12.8 -5.0 19.7 23.8FTSE Small Cap ex-ITs Index 72.4 -12.7 -7.8 0.6 17.8IA UK Smaller Companies 51.1 -0.4 -7.1 10.8 25.0Quartile 3 1 2 1 3
32
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 portfolio is primarily invested in smaller companies and companies traded on the Alternative Investment Market. These stocks may be less liquid and the price swings greater than those in, for example, larger companies.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisablevalue of the investment, particularly in the short term. Investments should always be considered as long term.
Key risks
33
For investment professionals only
This document is issued by Liontrust Fund Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518165) 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 document 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 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.
All the information provided should be treated as confidential, information may constitute material non-public information, the disclosure of which may be prohibited by law, and the legal responsibility for its use is borne solely by the recipient. This presentation has been produced for a professional audience it should not be distributed to, or relied upon by, retail investors. 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
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. 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.
Citywire. Anthony Cross and Julian Fosh are AA rated by Citywire and Victoria Stevens and Matt Tonge are AAA rated by Citywire for risk-adjusted performance from 31.07.18 to 31.07.21. Citywire information is proprietary and confidential to Citywire Financial Publishers Ltd (‘Citywire’), may not be copied and Citywire excludes any liability arising out of its use.
FE Crown Fund Ratings do not constitute investment advice offered by FE and should not be used as the sole basis for making any investment decision. All rights reserved.
© 2021 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Sustainability Rating as of 31.07.21. Sustainalytics provides company-level analysis used in the calculation of Morningstar’s Sustainability Score. © 2021 Morningstar. All rights reserved. The information contained herein:(1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
This fund is rated by Fund Calibre, for more information go to: www.fundcalibre.com.
21/867 AP/HC: 15.10.21 | 21/883 AP
Disclaimer
All our documents are printed on recycled paper or paper from a sustainable source in accordance with either the FSC, PEFC or EUEcolabel criteria to help keep our environmental impact to a minimum.
Appendices
35
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
Dec-
19
Jan-
20
Feb-
20
Mar
-20
Apr-
20
May
-20
Jun-
20
Jul-2
0
Aug-
20
Sep-
20
Oct
-20
Nov
-20
Dec-
20
Liontrust UK Smaller Companies FTSE Small Cap ex ITs IA UK Smaller Companies
UK Smaller Companies | 12 month performance to 31 December 2020
Portfolio return versus benchmark and peer group
Source: Data at 31.12.20, FE Analytics, bid-to-bid, net of fees, income reinvested basis, total return, primary share class. Percentage returns 31.12.19 – 31.12.20 versus comparator benchmarks FTSE Small Cap ex-ITs and IA UK Smaller Companies
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. Please refer to the Key Risks slide for more information
15.2%
6.5%1.7%
36
UK Smaller Companies | Fund performance 2020
Portfolio return versus benchmark and peer group
Source: FE Analytics 31.12.19 – 31.12.20, Liontrust UK Smaller Companies Fund, bid-to-bid, net of fees, income reinvested basis, total return, primary share class, versus comparator benchmarks FTSE Small Cap ex-ITs and IA UK Smaller Companies
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. Please refer to the Key Risks slide for more information
+17.7%+14.3%
+23.4%-37.1%-30.4%
-41.2%
Vaccine Rally31st Dec
+43.9%+45.0%
+40.0%
Market Rebound6th Nov
Market Fall23rd Mar
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
Dec-
19
Jan-
20
Feb-
20
Mar
-20
Apr-
20
May
-20
Jun-
20
Jul-2
0
Aug-
20
Sep-
20
Oct
-20
Nov
-20
Dec-
20
Liontrust UK Smaller Companies FTSE Small Cap ex ITs IA UK Smaller Companies
37
Economic Advantage team
The process seeks to identify companies that possess intangible assets which produce barriers to competition and provide a durable competitive advantage that allows the companies to defy industry competition and sustain a higher than average level of profitability for longer than expected. In the fund managers’ experience, the hardest characteristics for competitors to replicate are three classes of intangible asset: intellectual property, strong distribution channels and significant recurring business.
Anthony Cross, Julian Fosh, Victoria Stevens, Matt Tonge and Alex Wedge
Anthony Cross, Julian Fosh, Victoria Stevens, Matt Tonge and Alex Wedge manage the Liontrust Economic Advantage Process. Anthony, who was previously at Schroders, has managed the Liontrust Special Situations and UK Smaller Companies Funds since launch and he started working with Julian at Liontrust in 2008. Julian has previously managed money at Scottish Amicable Investment Managers, Britannic Investment Managers, Scottish Friendly Assurance Society and Saracen Fund Managers. Victoria Stevens and Matt Tonge joined the team in 2015. In Victoria’s previous role as deputy head of corporate broking at FinnCap, she built up an extensive knowledge of the smaller company investment universe. Matt had previously spent nine years on the Liontrust dealing desk, winning an industry award for his work in mid and small cap stocks. Alex Wedge joined the existing Economic Advantage team in March 2020 from N+1 Singer, where he was latterly a senior member of the equity sales team.
Economic Advantageinvestment process
38
Liontrust UK Smaller Companies portfolio style tilt as at 30 September 2021
Source: 30.09.21. Style Analytics, Liontrust UK Smaller Companies versus a comparator benchmark, FTSE Small Cap ex-ITs Index. MT = Medium term; ST = Short term; EBITDA = Earnings Before Interest, Taxes, Depreciation & Amortization
Value
Growth
Volatility
Momentum
Other factors
Yield
Size
Quality
-6.3-0.1
-2.6-5.7
0.5-1.7
4.88.5
-3.25.0
1.40.1
-4.13.3
-1.71.7
-5.11.8
-8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0
Book to PriceEarnings Yield
Cash Flow YieldSales to Price
EBITDA to PriceDividend Yield
Earnings GrowthSales Growth
Forecast Growth 12MReturn on Equity
Net Profit MarginMarket Cap
Market BetaMomentum ST
Momentum MTForecast FY1 Revisions
Debt to EquityForeign Sales
Style TiltTM
Styl
e F
acto
rs
39
Victoria Stevens & Matthew Tonge AAA rated by Citywire for their risk-adjusted performance from 31.07.18 to 31.07.21
Anthony CrossAA rated by Citywire for their risk-adjusted performance from 31.07.18 to 31.07.21. FE Alpha Manager 2012-14, 2016-21, FE Fundinfo Alpha Manager Awards 2020 – Best Alpha Manager of the Year and FE Fundinfo Alpha Manager Awards 2020 – Best Alpha Manager UK Equities
Julian FoshAA rated by Citywire for their risk-adjusted performance from 31.07.18 to 31.07.21. FE Alpha Manager 2012-14, 2016-21, FE Fundinfo Alpha Manager Awards 2020 – Best Alpha Manager of the Year and FE Fundinfo Alpha Manager Awards 2020 – Best Alpha Manager UK Equities
Liontrust
UK Growth Fund2, 3, 5, 6, 7, 15
UK Smaller Companies Fund1, 2, 3, 5, 7, 8, 9, 10, 14, 15
Special Situations Fund1, 2, 3, 11, 4, 5, 7, 8, 9, 12, 13, 15
UK Micro Cap Fund2, 5, 6, 8, 15
Economic Advantage | Awards and ratings
Source: Liontrust have been awarded the FT Adviser 100 Club Awards 2019 and 2020 – Small to Mid Investment Group of the Year, Professional Paraplanner Awards 2020 – Best Active Investment Solution Provider, Fund Calibre Elite Rated Provider 2021 - Equities and Investment Week Fund Manager of the Year Awards 2021 – Global Group of the Year. 1. Rayner Spencer Mills Rated Fund, 2. Morningstar Rating, 3. Morningstar Analyst Rating, 4. Morningstar Sustainability Rating, 5. FE Crown Rating, 6. FE Invest Approved List, 7. Square Mile, 8. Fund Calibre Elite Rated, 9. Money Observer Rated Fund 2019, 10. FT Adviser 100 Club Awards 2019 and 2020 – UK Smaller Companies Fund of the Year, 11. Morningstar Awards 2019 – Best UK Equity Fund, 12. AJ Bell Fund & Investment Trust Awards 2018 and 2020 – UK Equity (Active), 13. AJ Bell Fund and Investment Trust Awards 2020 – UK Equity – Active, 14. Adviser Centre – Established, 15. Defaqto Individual Fund Diamond Rating 2021
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. Please refer to the Key Risks slide for more information
Fund Manager Awards
2021
40
Composite: Economic Advantage – UK Small Cap Growth EquitiesComposite Inception Date: 01 January 2000Reporting Currency: GBPReporting Date: 31 December 2020Benchmark: FTSE Small Cap (Ex-IT) Index
GIPS | Economic Advantage – UK Small Cap Growth Equities
1. Liontrust Asset Management PLC (“Liontrust” or the “Firm”) claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with GIPS standards. Liontrust has been independently verified for the periods 1st January 2000 to 31st December 2019 inclusive. The verification reports are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.
2. For the purposes of GIPS, the Firm is defined as all funds under the management of Liontrust Asset Management PLC.
3. The “Firm” is known as Liontrust, and this encompasses the combined investment management activities of Liontrust Investment Partners LLP, Liontrust Fund Partners LLP and Liontrust Investment Management Limited. Liontrust is a specialist fund management company launched in 1995 and listed on the London Stock Exchange in 1999. All Liontrust entities are authorised and regulated by the Financial Conduct Authority.
4. The Firm was redefined from Liontrust Investment Partners LLP to Liontrust Asset Management PLC on 1st January 2018 as this Firm definition is the broadest definition available that includes all assets contained in the Firm’s composites.
Year Cumulative ReturnBenchmark
Cumulative ReturnNumber of Portfolios
Account Dispersion (StdDev)
3 Year Annualized Sample Standard
Deviation
Benchmark 3 Year Annualized Sample Standard Deviation
Composite Market Value Total Firm Assets
2020 16.80 1.65 2 0.05 19.48 23.57 1,372,997,813.44 27,469,312,5642019 32.84 17.68 2 0.12 11.74 10.49 1,170,561,196.00 17,873,788,6302018 -4.63 -13.80 2 0.13 12.81 11.50 845,161,145.00 10,794,064,8632017 28.49 15.61 3 0.88 10.15 9.61 1,005,153,256.00 10,210,655,0652016 15.18 12.54 3 -- 11.04 10.04 701,609,533.00 5,750,990,9152015 25.51 12.99 1 -- 8.15 9.34 432,545,000.00 4,543,690,1362014 5.87 -2.68 1 -- 8.85 11.75 318,482,000.00 4,139,397,2742013 32.40 43.86 1 -- 9.36 13.73 233,163,000.00 3,438,582,5322012 35.80 36.29 1 -- 10.81 14.96 144,218,350.00 2,530,007,7682011 2.94 -15.16 1 -- 12.97 25.00 73,975,175.00 1,364,021,162
41
GIPS | Economic Advantage – UK Small Cap Growth Equities
5. Additional information regarding policies for valuing portfolios, calculating performance and preparing compliant presentations are available on request.
6. A complete list and description of all the Firm’s composites has been constructed and is available upon request.
7. Economic Advantage is the collection of distinctive characteristics of a company that competitors struggle to reproduce. In our experience the hardest to replicate of these particular characteristics fall into the following three categories of intangible assets: intellectual property, strong distribution channels and significant recurring business. Economic Advantage in smaller companies is created and maintained by talented individuals. Research demonstrates that equity ownership motivates key employees, helps to secure a company’s competitive edge and leads to better corporate performance. It aligns the interests of the employees with outside shareholders and creates a more conservative attitude towards acquisitions and gearing. Every company held in the portfolio has at least 3% of its equity held by the main board directors. The process will invest in companies throughout the FTSE Small Cap, Fledgling and AIM Indices. Typically the portfolio will hold between 40 and 60 stocks with overweight positions of between 1-3% versus the FTSE Small Cap Index weights, where relevant, as per company risk grades. The portfolio is primarily invested in smaller companies and companies traded on the Alternative Investment Market. These stocks may be less liquid and the price swings greater than those in, for example, larger companies.
8. For the purposes of GIPS the composite was created on the 1st January 2000, however the composite has been managed by Liontrust since 8th January 1998.
9. Liontrust UK Smaller account returns are a combination of the primary Retail Share Class and the current primary Institutional Share Class. Retail - INC R GB0007420788 used from its inception in 07/08/1995 until the inception of the Primary Institutional Share class - INC I GB00B57TMD12 on 28/01/2013.
10. All performance returns and market values are denominated in Sterling.
11. The Benchmark is the FTSE Small Cap (Ex-ITs) Index.
12. All performance returns have been calculated gross of Ongoing Charges Figure (OCF). Furthermore, no other fees have been deducted bar trading expenses.
13. A representative fee schedule for this composite is an initial charge of up to 5%, along with a yearly Management Fee ranging between 1.25% - 1.50%. Note that fees for institutional investors are assessed on a case-by-case basis.
14. Throughout all time periods the number of portfolios contained within the composite was less than five, therefore no measurement of dispersion has been presented.
15. Three year standard deviation is not available when there are less than 36 months of returns available.
16. Liontrust is generally permitted to use financial derivative instruments to more effectively manage the level of investment risk and to facilitate efficient investment and management of cash and liquidity in each Fund. Liontrust may use futures, forwards (including forward rate agreements), options (both writing and purchasing), swaps (including credit default swaps) and contracts for difference, including both exchange traded and over the counter derivative instruments for any Fund. Additional information regarding investments in derivative instruments are available on request.