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Liontrust Special Situations - maintains strong long-term record

Dominic Rowles | Wed 10 January 2018

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.
  • Managers have added value by selecting companies with the best prospects
  • Fund has significantly outperformed peers over the long term
  • Fund remains on the Wealth 150 list of our favourite funds

Our View

Anthony Cross and Julian Fosh, co-managers of the Liontrust Special Situations Fund, seek high-quality companies with high cash flows, which could be capable of performing well in any economic environment. We like the managers’ robust investment process, which has been followed rigidly since the fund’s launch.

Our analysis suggests the managers’ ability to identify great companies has added significant value for investors over the long term. The fund has historically provided some shelter to investors’ capital in falling markets and performed in line with the broader market when it is rising, according to our analysis. Please remember past performance is not a guide to future returns.

Anthony Cross and Julian Fosh tend to invest in a relatively small number of companies, which means each one can have a significant impact on returns, although this is a higher-risk approach. We think the fund could make a good addition to the UK portion of a wider portfolio and it continues to feature on the Wealth 150 list of our favourite funds in the major sectors.

What do the managers look for?

The managers seek large, medium-sized and higher-risk smaller companies with a set of advantages that their competition would struggle to replicate. Each of the fund’s investments has at least one of the following characteristics:

Intellectual property

Companies with features such as patents, trademarks and brands are attractive to the managers because they provide a sustainable advantage over competitors. Shares in electrical equipment firm Renishaw have been held in the fund for more than ten years. The company benefits from extensive intellectual property built up through decades of research and development.

A distribution network

It can take a significant amount of time and money to establish an efficient distribution network, which can make for a considerable advantage over the competition. An investment in Domino’s Pizza should continue to benefit from its established distribution network, in the managers’ view. The company is the UK’s largest pizza delivery business with approximately 930 outlets and also benefits from an established brand, high demand for new franchises and an advertising spend of £50m nationally, according to the managers.

Recurring income

A recurring income makes cash flows more certain which can be invaluable when the economy performs poorly. The fund’s investment in wealth management firm Brooks Macdonald receives over 70% of its annual income from recurring fees, according to the managers, and its strong customer relationships inspire loyalty and encourage repeat business.

How has the fund performed?

The high-quality companies favoured by the managers have been coveted by many investors in recent years as their high cash flows and dependable earnings streams made them appear lower risk than their more economically-sensitive counterparts. A focus on this type of company has therefore boosted performance.

An investment of £10,000 made 10 years ago would today be worth £36,428 with dividends reinvested, while the average fund in the UK All Companies sector would have returned £18,732, although past performance is not a guide to the future*.

Performance over the past year was also strong, boosted by the managers’ ability to select companies with the best prospects. Standout performers over this period include quality assurance firm Intertek and RWS Holdings, a company that offers assistance to people filing patents.

Annual percentage growth
Dec 2012 -
Dec 2013
Dec 2013 -
Dec 2014
Dec 2014 -
Dec 2015
Dec 2015 -
Dec 2016
Dec 2016 -
Dec 2017
Liontrust Special Situations 21.2% 1.9% 13.9% 15.8% 16.8%
FTSE All-Share 20.8% 1.2% 1.0% 16.8% 13.1%
IA UK All Companies 26.2% 0.5% 4.8% 11.2% 14.0%

Past performance is not a guide to the future. Source: *Lipper IM to 31/12/2017

Find out more about this fund including how to invest

Please read the key features/ key investor information document in addition to the information above.

Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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