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Liontrust UK Smaller Companies

Elite Rated by FundCalibre

Managed by the successful team behind Liontrust Special Situations, Anthony Cross and Julian Fosh, this fund employs the same investment strategy but with a small-cap bias. The distinctive investment process focuses on firms with strong positions within their industries and how key employees are motivated. It has a great track record and is particularly strong in down markets.

Company Description

Liontrust Asset Management was founded in London in 1995 and prides itself on the freedom it allows its managers, who invest in their own portfolios. Listed on the Stock Exchange since 1999, company culture is at the forefront of their values. They were awarded the Elite Provider for Equities Rating.

Factsheet_liontrust_final_lockup

Fund Manager

Anthony Cross has managed the fund since 1998, with Julian Fosh joining as co-manager in 2008. Cross has honed his investment process over a number of years, and in 1997 he published the Cross Report, which forms the blueprint of the fund’s investment strategy.

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We like smaller companies where the directors share our gain and occasional pain by owning at least 3% of their business. It proves to be a great motivator.

Anthony Cross & Julian Fosh - Fund Managers

The Investment Process

The managers look for firms with “intellectual capital”, which includes strong distribution networks, recurring revenue streams and products with no obvious substitutes. Another important factor is how key employees are motivated, with the preference being through direct ownership of the company’s equity. The resulting portfolio consists of companies that can grow their earnings independently of the wider economy.

Risk

The quality bias and the managers preference to avoid cyclical stocks, mean this fund is one of the least volatile in the UK Smaller Companies sector. That said, it should still be considered higher risk than the FTSE 100, as the small size of the underlying companies means they are more vulnerable to economic shocks than their larger counterparts.

Our Opinion

A clear, well thought through investment philosophy, developed by Anthony Cross and documented in The Cross report, underpins the investment strategy. It has been executed with diligence and skill by both managers, not only in this fund, but also in other mandates. The emphasis on quality and avoiding cyclical stocks has worked particularly well with smaller companies, with the fund producing excellent relative and risk-adjusted performance figures.

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