Managed by the successful team behind Liontrust Special Situations fund of Anthony Cross and Julian Fosh, Liontrust UK Smaller Companies 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. The fund has a great track record and is particularly strong in down markets.
Our opinion
A clear, well thought-out investment philosophy underpins the Liontrust UK Smaller Companies fund. The process has been executed with diligence and skill by both managers for many years. 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.
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, the company's culture is at the forefront of its values. The firm was awarded the Elite Provider for Equities Rating in 2015, 2016, 2019 and 2021.
Fund manager
Anthony Cross has managed the Liontrust UK Smaller Companies fund since 1998, with Julian Fosh joining as co-manager in 2008. Anthony 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. In 2015 Victoria Stevens and Matthew Tonge joined the team and became co-managers on the fund, followed by Alex Wedge in 2020.
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 CrossFund manager
Investment process
The managers of Liontrust UK Smaller Companies fund look for firms with intellectual capital, strong distribution networks, recurring revenue streams and products with no obvious substitutes - hidden intangible strengths that can protect a company’s competitive position over time. Another important factor is how key company employees are motivated, with the preference being for direct ownership of the firm's equity. The resulting portfolio consists of small companies that can grow their earnings independently of the wider economy.
ESG
ESG - Limited
The ‘Economic Advantage’ process employed by this fund looks for those businesses with distinctive, hard-to-replicate intangible assets. This does include the analysis of ESG factors, but more to identify the risks and use to help with position sizing, rather than as a screen. As such, the portfolio can invest in firms from all sectors and industries, though those with poor ESG credentials will be looked on less favourably than others, all other things being equal.
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. There are also maximum holding sizes and concentration rules to help manage risk levels in the portfolio.
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