Liontrust UK Equity: June 2024 fund update

• Imran Sattar became sole manager of the fund in November 2023

• The fund’s style has evolved to become more growth orientated and invested to a greater extent in larger companies

• The manager looks to invest in growing companies with strong economic moats that protect them from the competition

• This fund is not on the Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The fund could be an option for the UK section of a broader global investment portfolio. The fund’s focus on quality means it could work well alongside other funds investing in unloved UK companies with recovery potential. The managers primarily hunt in the FTSE 100 and FTSE 250 but also have the flexibility to invest in higher-risk smaller companies.

Manager

Imran Sattar began his career at Mercury Asset Management in 1997, before joining Blackrock to manage UK equity funds. In 2018, he joined Majedie Asset Management to continue running UK equity funds and became a co-manager of this fund in July 2019. In Aprill 2022, Sattar joined Liontrust when the business acquired Majedie.

Following the retirement of experienced managers James de Uphaugh and Chris Field, Imran Sattar was appointed as portfolio manager of the trust in February 2024. He’s supported in managing the trust by deputy portfolio manager, Emily Barnard.

In November 2023, vastly experienced fund managers Chris Field and James de Uphaugh stepped back from the fund ahead of their respective retirements. At this point, Sattar became sole manager of this fund and he’s now supported by the broader Global Fundamental investment team at Liontrust.

Following these fund manager retirements, we removed the fund from the Wealth Shortlist in October 2023.

Process

The manager looks to invest in growing companies with strong economic moats that protect them from the competition. These are often companies where the manager believes that the market has underestimated the duration and rate at which the company is likely to grow for. Meeting with company management teams is an important part of the investment process. The meetings allow the fund manager to probe management and glean insights that aren't available through the report and accounts. The manager also uses the insights from these meetings to inform his macroeconomic view on how economic changes could impact the companies he invests in.

The fund is mostly invested in larger companies, with 76.0% invested in businesses that feature in the FTSE 100. Industrials is the largest sector allocation in the fund at 21.3% of its assets, followed by Consumer discretionary companies at 16.9%.

In recent months, the manager has added a new investment to the fund in engineering business, Rotork, with Sattar optimistic on the company’s growth prospects. Energy company, Centrica has been trimmed in recent months with the manager preferring other investments on the basis that the business doesn’t have significant pricing power.

Culture

In recent years, Liontrust has acquired several smaller asset management companies. Acquisitions and other corporate changes can impact the culture of a business and unsettle the firm’s existing investment teams. We will continue to monitor the situation closely and keep investors informed if our views change.

Liontrust gives managers the freedom to manage their funds according to their own investment and market views. The company simply asks managers not to deviate from their investment processes. Each manager's funds are regularly checked by other senior managers at Liontrust to ensure they're staying true to their investment processes.

We like that all Liontrust fund managers invest a significant amount of their own money into the funds they run. This helps to align their interests with those of investors.

ESG Integration

The quality of ESG integration varies across Liontrust. The firm gives fund managers the freedom to run their portfolios according to their own investment and market views. The company simply asks managers not to deviate from their investment processes. Some managers have chosen to fully integrate ESG, while others are still developing their approach.

The firm’s Sustainable Future range of equity and fixed income funds do incorporate ESG analysis and invest to achieve positive change. Every team member is responsible for all aspects of financial and ESG analysis – ESG analysis is not farmed out to a separate team. The team produces regular insight articles, available via the Liontrust website. They also produce a Responsible Capitalism report, which explores the team’s views on a variety of sustainability-related issues.

They publicly disclose all voting decisions on a quarterly basis, although no rationales are provided. They also communicate their voting intentions to companies and engage with them on issues of contention to encourage change.

Cost

This fund has an ongoing annual charge of 0.65%, but a discount of 0.10% is available for HL investors, which reduces the charge to 0.55%. The fund discount is achieved through a loyalty bonus, which could be subject to tax if held outside of an ISA or SIPP. The HL platform fee of up to 0.45% per year also applies, except in the HL Junior ISA, where no platform fee applies.

Performance

Since Imran Sattar became sole manager of the fund in November 2023, the fund has delivered a return of 16.40%, ahead of the 15.55% return from the FTSE All Share index, but slightly behind the 16.76% return from the IA UK All Companies sector average. Investors should be aware that this is a very short timeframe to consider performance over and past performance isn’t a guide to the future.

Over the last 12 months, the fund has delivered a return of 13.80%, lagging behind the FTSE All Share’s 15.44% return but beating the IA UK All Companies sector average return of 13.47%. Our analysis suggests that the fund’s investments in utility company Centrica and communications business 4imprint Group have been among its better performers. Not all of the fund’s investments have performed well though, pest control service provider Rentokil and wealth manager St James’ Place have been among the weaker performers.

As expected following Sattar taking control of the fund, our analysis suggests that the fund’s style has evolved to become more growth orientated and invested to a greater extent in larger companies. This means that the fund offers investors a different exposure to the UK market than it has done in the past.