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 does not predict future returns. You may get back less than you originally invested.
We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.
The single strategy funds managed by the Multi-Asset team:
- May consider environmental, social and governance ("ESG") characteristics of issuers when selecting investments for the Funds.
- 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.
- Holds 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, 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.
- May invest in emerging markets which carries a higher risk than investment in more developed countries. This may result in higher volatility and larger drops in the value of the funds over the short term.
- May target an absolute return. There is no guarantee that an absolute return will be generated over the time period stated in the fund objective or any other time period.
The risks detailed above are reflective of the full range of single strategy funds managed by the Multi-Asset 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.
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.
DISCLAIMER
This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) 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 investment being promoted is for units in a fund, not directly in the underlying assets.
This information and analysis 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, 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.
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.com 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.
